Federal government announces low-interest loans for businesses hard hit by COVID-19 – Coronavirus (COVID-19)


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On January 26, 2021, Canada’s Minister of Small Business, Export Promotion and International Trade announced a new government loan guarantee program targeting businesses most affected by the COVID-19 pandemic. The Access to Credit Program for Highly Affected Sectors (HASCAP), first introduced in the federal government’s 2020 Fall Economic Statement, will involve the Business Development Bank of Canada (BDC), which will work with institutions Canadian financial institutions to provide low interest government guaranteed loans.

Learn more about the BDC program here.

What would you like to know

  • HASCAP targets small and medium-sized businesses that have experienced a year-over-year drop in revenue of 50% or more due to COVID-19.
  • The guarantee covers loans between $ 25,000 and $ 1 million.
  • HASCAP-guaranteed loans will offer low interest rates and repayment terms of up to 10 years, with a 12-month deferral of principal repayments at the start of the loan.
  • HASCAP is available until June 30, 2021.

What is HASCAP?

HASCAP is a government guarantee of 100% of the value of eligible loans between $ 25,000 and $ 1 million issued by financial institutions to eligible businesses that have been severely affected by the COVID-19 pandemic.

Businesses that operate multiple locations (including multiple hotels) under a parent entity may be eligible for loan guarantees of up to $ 6.25 million. The guarantee is available for loans intended to cover the operational cash flow needs of these companies, and not to pay or refinance existing obligations. The program is available to businesses in all sectors across Canada, but will benefit those in sectors hardest hit by the pandemic, such as tourism and hospitality.

The loans will be made through the company’s primary financial institution and will offer low interest rates and repayment terms of up to 10 years. These loans will also offer interest payments only for the first 12 months at the start of the loan.

Who is eligible for HASCAP?

BDC has defined the following eligibility requirements for the HASCAP program:

  1. The business must have been financially stable and viable prior to the current economic situation;
  2. The business must have received the Canada Emergency Wage Subsidy (SSUC) or the Canada Emergency Rent Grant (SCRU) by demonstrating a decrease in income of at least 50% from one year to the next. other for at least three months within the eight month period prior to applying for HASCAP;
  3. The loan will be used to continue or resume operations and not to pay or refinance existing obligations; and
  4. The company is based in Canada (it is not yet clear whether this may restrict the availability of HASCAP to Canadian-owned companies).

Other eligibility conditions may apply in the future. BDC notes that no financial institution has the power to grant exceptions to pre-financing eligibility conditions. Businesses will be eligible even if they have received other federal benefits related to COVID-19.

How to register

Eligible businesses can apply through a limited set of financial institutions starting February 1, 2021. Other financial institutions will begin offering the program by February 15, 2021. Businesses have until June 30, 2021 to apply.

If the business has already received the SSUC or CERS, the application must include its Canada Revenue Agency attestation forms demonstrating a decrease in revenue of at least 50 percent for at least three months during the eight-month period preceding the HASCAP request.

If the company has not received an SSUC or CERS and is eligible for either program, the company must apply for one or both before applying for HASCAP and provide proof of receipt. payment under the respective program during the HASCAP application process.

While the eligibility requirements for the SSUC or CERS are set out on BDC’s website, they also provide for a situation where the business is not eligible for these programs. We recommend that companies interested in applying for the HASCAP program but not eligible for the SSUC or CERS check the BDC website and their financial institution to determine their eligibility for the HASCAP program.

Please note that the three months of declining income for any of the above circumstances do not need to be consecutive.

As part of the application process, the business applicant will need to complete the online HASCAP warranty identification form, which requires high level information to be provided about the business. This is to provide information to the federal government on the types of businesses that are requesting relief under HASCAP.

To take with

HASCAP aims to provide much needed support to sectors that continue to fight the effects of COVID-19. This will especially help those in the tourism and hospitality sector as they face continued travel restrictions and another summer of declining demand expected.

Originally posted by Borden Ladner, January 2021

About BLG

The content of this article is intended to provide a general guide on the subject. Specialist advice should be sought regarding your particular situation.

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