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Learn how to survive as a small business in COVID-19 times, whether it’s by securing a small business loan during COVID-19, or applying for federal funding.

Federal and provincial closures of local small businesses in COVID-19 times have wreaked havoc on the 2020 financial year for many of them, and 2021 looking to offer more of the same dismal prospects. If you’re a small business owner, you may have gone from cautiously optimistic that 2021 will be different, to going back to worrying about how to stay afloat and trying to secure a small business loan to cope with COVID-19.

Layoffs and closures can be tough on a business, but the federal government has announced several programs to provide relief to your small business and employees. If you combine these programs with a little ingenuity, you’ll give your small business its best chance of surviving the COVID-19 pandemic.

Check Your Cash Flow Reserves and Insurance Options

While it may have taken a few weeks to assess how much your revenue has been impacted by the provincial and federal restrictions, you should have a reasonable idea of whether you can continue to earn an income now. Use the information to forecast your cash flow and assess whether your current cash reserves will cover a prolonged drop in revenue.

This is an excellent time to check your insurance to see if it includes coverage for lost revenue.

Where to Get a Small Business Loan for COVID-19

If you don’t have the cash reserves to weather the financial storm, you may need a loan to cover the difference. The federal government has launched a variety of loan programs for new entrepreneurs, small businesses, new businesses, and rural businesses. These loans are administered in conjunction with local lenders and business development agencies.

The first program to consider is the Canada Emergency Business Account (CEBA) , which provides support for small and medium-sized businesses who have seen a drop in revenue during the COVID-19 pandemic. CEBA is offered through local banks and credit unions and provides interest-free, partially forgivable loans up to $60,000 to small businesses to help them cover a variety of operational expenses. To apply, you need to contact your local lender.

If you’ve exhausted your federal pandemic-related loan options, you may need to look into private loan options to keep your business afloat during the pandemic. You can approach your local lender, or use an online lending platform like Loans Canada, which connects you with lenders offering up to $500,000 in small business loans to Canadians. Interest rates start at 4.70% and terms extend up to 60 months. You could also consider a personal loan such as a home equity loan, but be aware that this type of loan uses your home as collateral. If you default, your home may be seized by your lender. Read more about The Best Business Loans for Small Businesses in Canada.

Learn more about Loans Canada

Manage Staffing Issues

Many small businesses will face the difficult task of managing staff during these trying times, both due to the decrease in revenue due to business restrictions, but also physical distancing requirements as required by public health authorities. If you find yourself needing to make staffing changes, it’s essential to be honest with your employees. Make sure they know you want to keep them on payroll, but may not be able to.

Before committing to laying off employees, consider other options. You could reduce your staff’s hours if revenue is an issue, or you could apply for the Canada Emergency Wage Subsidy. This subsidy covers 75% of employee wages if your business has suffered a drop in revenue after July 5th, 2020   This program was originally slated to end in June, 2020, but has been renewed until July 15th, 2021.

If your current office cannot comply with physical distancing requirements, you don’t have to send your employees home automatically. Instead, consider implementing work from home protocols or requiring employees to work in shifts to allow you to continue doing business without interruption.

If you find yourself with no other option but to lay off your employees, you should make sure they are familiar with the Canada Recovery Benefit, which is available to all workers in Canada who have been laid off and those who have experienced a 50% drop in their income compared to the same period in a previous year. This taxable benefit ensures your employees access up to $2,000 every four weeks for 13 two-week eligibility periods until September 25th, 2021. Read Our Guide to COVID-19 Emergency Benefits and Financial Relief.

Be Proactive With Suppliers and Other Expenses

If you make regular purchases from suppliers for products that you may no longer need, communicate openly with your suppliers about stretching payment terms and lowering interest rates. Ideally, you’ll be able to defer payments long enough to remain in good standing with creditors.

If you’re having trouble making your rent payments, you can take advantage of a rent reduction subsidy being offered by the federal government in conjunction with the provinces, which have authority over rents. This program is called the Canada Emergency Rent Subsidy (CERS).

This program allows you to apply for a subsidy of your rent payments, provided you can demonstrate that your revenue has dropped. There is no minimum amount that your revenue must drop to qualify for the subsidy, but the drop is required to calculate the size of your subsidy.

The subsidy applies to a maximum of $75,000 in eligible expenses per single location of your business, and a maximum of $300,000 in expenses per claim period.

If you are required to close under a lockdown or public health order, you may be eligible for lockdown support of up to 25% of eligible expenses for the days the lockdown was in effect.

Get Creative

Ideally, you could avoid laying off employees and taking out small business loans entirely by getting creative with how you earn revenue. By rethinking your small business in COVID-19 times and finding new ways to deliver your product or service, you may be able to manage without subsidies or benefits.  You may even find a new business niche and see an increase in revenue. Here are some examples of how businesses have adapted to the COVID-19 climate:

  • Offering curbside pickup for products
  • Launching an online store with delivery so customers can shop from home
  • Shifting production to in-demand items like cloth masks or hand sanitizer
  • Delivering services virtually through online meeting portals like Zoom

The Final Word

During a pandemic, we offer the same advice for small business owners as we do for individuals. Since no one could have seen this situation coming, it’s incredibly challenging to prepare for it in advance. If you are struggling to make your business profitable during this time, don’t be too hard on yourself. It’s unlikely that 2020 will be a successful year for many companies in Canada.

The best you can do is try to keep your business afloat by practicing financial diligence and taking advantage of all available subsidies and benefits. You may need to make difficult decisions, like laying off employees or temporarily closing your doors. Still, a prudently-run business should be able to bounce back and operate as part of a ‘new normal’ in the long run.

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