Business loan

Check out HASCAP, the emergency COVID business loan program everyone forgot about

With other programs ending, HASCAP is one of the few companies that can use Omicron

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The New Year wasn’t supposed to be like this for small businesses.

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Heading into the final months of 2021, businesses were hiring, consumers were spending, and the Bank of Canada saw enough positive moves in the economy to start hinting at interest rate hikes.

But Omicron’s rapid spread since then has thrown businesses in Canada’s two most populous provinces into an all-too-familiar state of disarray. Both Quebec and Ontario have reinstated various restrictions on certain businesses, closing some while reducing capacity in others.

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If you’re a small business owner, it may feel like the walls are closing in. Once again. But even if the federal government’s most widely used programs – CEWS, CERS, and CEBA – have all ended, there’s still a way for your business to access emergency cash: the Sector Credit Availability Program. Highly Affected, or HASCAP.

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The program provides low-interest guaranteed loans to businesses that have been significantly impacted by COVID-19. Loan amounts range from $25,000 to $1 million and are intended to be used to cover operational cash requirements.

But so far, companies have left HASCAP almost untouched. As of September 30, 2021, only 10,600 HASCAP loans with a relatively small value of $2.5 billion have been approved.

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This contrasts with loans from the Canada Emergency Business Account (CEBA), which have been taken out by some 898,000 Canadian businesses for a total of $49 billion borrowed.

Why have so few companies applied for HASCAP?

According to Corinne Pohlmann, vice president of national affairs at the Canadian Federation of Independent Business, the gap between HASCAP and previous loan programs is not because HASCAP is an inferior program.

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“The reason the CEBA loan program was so popular was that it had a repayable portion,” says Pohlmann, referring to the $20,000 rebate originally offered to borrowers who repaid their loans by Dec. 31, 2022. In January, the federal government extended the CEBA deadline to the end of 2023.

CEBA loans are also interest-free if repaid before the deadline, a feature not offered with HASCAP.

Pohlmann says with Canadian small businesses already carrying an average COVID-related debt of around $170,000, adding an additional HASCAP loan into the mix “isn’t very attractive” to all business owners. business.

“Companies need to think twice about this. Even though it’s a pretty attractive loan in terms of terms, it’s more debt you’ll have to pay off,” she says. But she adds that, for some businesses, “easily accessible loans are better than nothing”.

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How it works

The Business Development Bank of Canada (BDC), the government agency that administers the program, has defined “highly impacted” as a decrease in business revenue of at least 50% in three of the eight months prior to your application . If you have applied for ESRB or CEWS, the same income guidelines apply.

Having previously applied for other government aid will not prevent you from applying for HASCAP. As long as your small or medium-sized business is based in Canada, was financially viable before the pandemic, and is in serious revenue pain, you can apply.

While BDC oversees the program, it cannot help you obtain a loan. You will need to apply through one of the more than 50 financial institutions who provide the actual funds.

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Applications will be accepted until March 31, 2022.

get approved

You will be asked to meet different risk assessment requirements depending on the level of support your business needs. The more you intend to borrow, the stricter the guidelines become.

  • For loans between $25,000 and $100,000your business will need to meet what the BDC calls a “probability of default” requirement, or baseline underwriting to determine if you can afford the loan.
  • For loans between $100,001 and $250,000your company must meet the same probability of default standards and have generated a minimum of $500,000 in gross revenue over a given period: the 12 months preceding the date of its last annual financial statement before March 1, 2020.
  • For loans between $250,001 and $1 million, your business must meet a minimum debt service coverage ratio of 1.10x, including the HASCAP loan itself. Loans of this size also require your business to have obtained a minimum credit rating of CCC+ from Standard & Poor’s by March 1, 2020.

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If approved, you will enjoy a repayment term of up to 10 years at an interest rate of 4%. When your loan starts, there is a 12-month grace period during which you won’t need to make any principal payments.

Your HASCAP money can only be used to continue or resume your business operations. You cannot use it to pay off or refinance existing loans. If your business is a nonprofit, religious organization, or has government ties, your application will likely be denied. The same applies if you have already been caught in the act of tax evasion.

Other aids available

If a HASCAP loan isn’t right for your business, there are a few other programs still in operation that might help.

Ontario businesses forced to close due to recent restrictions can access $10,000 in Ontario Small Business Support Grants. The province has also established the Business Expense Reimbursement Program to provide rebates for certain property taxes and energy costs.

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In Quebec, businesses ordered to close as of December 20, 2021 can apply for assistance under the Assistance to businesses in regions on maximum alert (AERAM) part of the Emergency Assistance Program for Small and Medium-Sized Enterprises of the province. Loans offered by AERAM may be eligible for a discount of up to 80%.

At the federal level, the Local Lockdown Program offers wage subsidies of 25 to 75 percent to businesses facing a revenue drop of at least 25 percent. Two federal programs also exist to help affected businesses manage rental costs: the Tourism and Hospitality Recovery Program and the Hardest-Hit Business Recovery Program, both of which are due to expire on May 7, 2022.

With billions in aid already available to Canadian businesses over the past two years, the federal government is unlikely to be able to justify opening the taps much further. If your business needs help, find the programs that are right for your business today. They may not stay long.

This article provides information only and should not be construed as advice. It is provided without warranty of any kind.

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