The Canadian government often offers businesses grants and loans in order to help them succeed. In times of economic hardship, getting a governmental grant might seem like the perfect solution for Canadian entrepreneurs who are struggling with debt.
But can you use government grants to pay off debt? Read on to find out.
Government Grants For Small Businesses in Debt
The Canadian government offers multiple loans and grants for small businesses. But it’s important to note that as a business owner, you cannot use the money you receive as a business loan or grant to pay off your debts, with a notable exception.
If your business was affected by the COVID-19 pandemic and you had to shut down or restrict your services to respect public health measures, you can apply for rebates in the form of grants to help with some of your expenses.
COVID-19 Energy Assistance Program for Small Business (CEAP-SB)
If you’re struggling to pay your company’s energy bill as a result of the pandemic, you may qualify for the COVID-19 Energy Assistance Program for Small Business (CEAP-SB).
Ontario’s government is providing $8 million to support small businesses that were affected by the pandemic and are now struggling to pay their energy bills. CEAP-SB grants businesses a one-time bill credit of up to $850 to support their electricity bill if they use electricity as a primary source of heating. If they use other primary heating sources, small businesses may qualify for a one-time grant of up to $425.
You can apply for a CEAP-SB grant through your utility or unit sub-meter providers (USMP).
Canadian Emergency Business Account Program (CEBA)
The Canadian Emergency Business Account (CEBA) is a $55 billion program that provides interest-free loans to small businesses and not-for-profits. CEBA provides loans of up to $60,000 to active businesses that are sole proprietorships, partnerships, or Canadian-controlled private corporations with active CRA business numbers that have an effective date of registration prior to March 1, 2020.
CEBA applications end March 31, 2021. You can apply for a CEBA business loan directly from your primary financial institution. There are more than 220 participating financial institutions across the country. Repaying the loan before December 31, 2022 results in loan forgiveness of 33 percent.
Your business may be eligible for the CEBA program if you paid $20,000 – $1,500,000 in employment income in the 2019 calendar year or if you had $40,000 – $1,500,000 eligible non-deferrable expenses such as rent, utilities, property taxes, and insurance and filed an income tax return with the CRA for 2019 or 2018.
The Canadian government will assess each application based on the information and supporting documentation submitted by your financial institution and will provide funding for your CEBA loan through the same institution.
Ontario Small Business Support Grant
If your business was affected by the COVID-19 pandemic, you may also apply for the Ontario Small Business Support Grant and may be eligible for rebates for your municipal and education property taxes.
Other Small Businesses Options for Paying off Debt
You may be surprised to learn that the Canadian government doesn’t help small businesses to pay off their debt through grants and loans. However, the government offers small businesses some programs and resources that can help them move toward a debt-free future. Here’s what small businesses can do to pay off their debt.
Debt Consolidation
Debt consolidation can be one of the most effective ways of dealing with debt, especially if you can trace most of the money you owe back to credit card debt. Debt consolidation can help you save money by lowering the amount of interest you pay over time, and it can also help you organize your spending as it brings all your debts under one monthly payment.
Credit card debt can be difficult to eliminate because of the high interest rates which can sometimes be as high as 29.9%. High interest rates can significantly increase your debt, especially if you can only afford to make the minimum payments. Making only the minimum payments means that it would take you a long time to pay off the debts, so you may end up paying a lot of money in interest.
Consolidating your debt enables you to bring multiple debts under a single, usually lower, interest rate. This can make a big difference in your ability to pay off what you owe because your debt would not increase significantly each month, allowing you to complete the payments sooner.
Settle Your Debt
Settling your debt can be a good debt relief solution for businesses that have large debts and don’t make enough to cover them. Setting your debt means reaching out to your debtors and offering to pay off a lower amount than what you really owe.
While at a first glance you may think that not many companies would accept to receive a lower amount of money than what they’re really owed, the reality is that most of them would rather receive something than risk not being paid at all.
If you want to settle your debt, we recommend contacting a Licensed Insolvency Trustee and having them talk to your creditors in order to settle the debt for you.
Consult a Licensed Insolvency Trustee
If your business owes money and you don’t know how to handle it, you can contact Remolino & Associates and talk to a Licensed Insolvency Trustee. Our financial experts have counselled many business owners operating in a wide variety of industries over the years and can help you spot the faults in your business plan.
When you contact us, we take a close look at your financial records, we examine your business model, cashflow, and everything else that’s needed to understand your financial situation. Together, we can identify the best debt relief solution for your business, which may include:
- Cost cutting
- New cash flow management solutions
- Debt consolidation
- Proposal
- Bankruptcy
File a Consumer Proposal or a Commercial Proposal
If you are self-employed and owe less than $250,000, you may qualify for a consumer proposal. Consumer proposals are legally binding debt settlement agreements that can help you come to an agreement with your creditors and pay only a fraction of what you owe. Consumer proposals can eliminate most kinds of debt, including credit card or tax debts.
Even though you could say that a consumer proposal is similar to setting your debts, the main difference is that filing a consumer proposal is a formal process that’s legally binding. This means that both you and your creditors have to agree on certain terms and respect them.
Consumer proposals are debt-relief solutions that can be helpful for those who have debts that are significantly higher than what they can afford but want to avoid bankruptcy.
File for Bankruptcy
Even though it has a bad reputation, filing for bankruptcy can sometimes be the only solution to get out of debt. Filing bankruptcy is usually the last resort option when handling debt. Bankruptcy is a legal process that’s regulated by the federal government. It gives honest debtors the opportunity to get out of debt and gain a new financial start.
Need professional advice and assistance with small business debt? Remolino & Associates can help.