Federal loans open to eligible businesses hard hit by COVID-19

Ottawa – The federal government has launched the Highly Affected Sectors Credit Availability Program, or HASCAP, to provide financial support to businesses that have been hardest hit by the pandemic.

Through the program, the Business Development Bank of Canada (BDC) will work with participating Canadian financial institutions to offer government-guaranteed, low-interest loans of up to $1 million. Hard-hit businesses, like a chain of hotels or restaurants with multiple locations under one related entity, could be eligible for up to $6.25 million. HASCAP will help businesses with their day-to-day operating costs during the COVID-19 crisis and enable them to invest in their longer-term prosperity.

HASCAP is available to businesses across the country, in all sectors, that have been hit hard by the pandemic. This includes restaurants, businesses in the tourism and hospitality sectors, and those that rely on in-person service.

To be eligible, businesses need to show a year-over-year revenue decline of at least 50 per cent in three months, within the eight months prior to their application. They must also be able to show their financial institutions that they have previously applied for either the Canada Emergency Wage Subsidy or the Canada Emergency Rent Subsidy.

To be eligible, businesses need to show a year-over-year revenue decline of at least 50 per cent in three months, within the eight months prior to their application.

Eligible businesses can start applying as early as Feb. 1 at principal financial institutions and more widely by Feb. 15. Interested businesses should contact their primary lender to get more information and to apply.

HASCAP is the responsibility of the the Ministry of Small Business, Export Promotion and International Trade. More information is available at bdc.ca/hascap.

Restaurants Canada provides a brief overview of the program:

Three loan options per legal entity:

• $25,000 – $100,000
• $100,001 – $250,000
• $250,001 – $1 million

There is a maximum $6.25 million of all related legal entities. Restaurants Canada is awaiting additional details of the criteria for related entities, but RC reports that right now it looks like ownership of 25 per cent or more will result in a related entity.

Additional loan parameters:

• 10 year repayment
• 4% fixed interest rate
• 12 month postponement of principle repayments
• No personal guarantees
• Available until June 30, 2021

You must already be receiving either CEWS or CERS and have a 50 per cent revenue decline for at least three months – these do not have to be consecutive months. If you are not receiving CEWS or CERS, you will have to apply and qualify before applying for a HASCAP loan. If you do not qualify for CERS or CEWS, you will then have to provide at least three months proof of monthly revenue decline of 50 per cent.

There will also be additional qualifying requirements that measure your probability of default PRIOR to March 1, 2020 (NOT during pandemic conditions), in addition to minimum revenue amounts depending on the amount of loan you’re qualifying for. There will also be a minimum S&P CCC credit rating required prior to March 1, 2020.

You will have to apply for the HASCAP loan through your primary financial institution.

You will not be permitted to use the loan funding to pay down other, existing debt or lease facilities nor can you use it to pay bonuses, dividends, etc. (except for very specific scenarios where it is a regular part of employee remuneration).