April 9, 2020

Research Money – “Tens of thousands” of Canadian SMEs could go under without faster government help, innovation and business groups warn: Mark Lowey, Research Money

The federal government needs to expand its emergency wage subsidy program, suspend R&D tax credit audits and get money out the door faster, or many thousands of SMEs – from “Main Street” service businesses to scaling tech firms – will go under, say innovation and business group executives.

“I can’t imagine there being any fewer than tens of thousands of businesses that permanently close their doors by the end of this COVID-19 crisis,” Dan Kelly, president of the Canadian Federation of Independent Business (CFIB), told Research Money.

Some of Canada’s 12,000 Canadian-owned small tech and innovative companies have already folded while others are being bought at fire-sale prices by large U.S. companies, says Suzanne Grant, CEO of the Canadian Advanced Technology Alliance. “Those companies that have got resources are coming in and grabbing the talent.”

Ben Bergen, executive director of the Council of Canadian Innovators (CCI), says restricting the Canada Emergency Wage Subsidy program to companies that can show a 30% year-to-year drop in revenue unfairly disqualifies high-growth tech firms. While these companies may have grown their year-to-year revenue, they’ve also incurred much greater wage costs from adding more employees, he says. “This current wage subsidy leaves them on the sidelines in terms of being able to support their business.”

Also, innovative startups that have been operating for less than a year or haven’t yet become profitable would be ineligible for the wage subsidy.

The government should eliminate the 30% criteria at least for small businesses, Kelly says. “Just the fact there are conditions, especially for smaller companies, they’re going to say: ‘I can’t afford to take the risk. I’d better just lay off my employees.’”

Another concern is that the government has said it will take three to six weeks for wage subsidy funds to land in business accounts. That timeline typically amounts to three pay cycles for businesses, Kelly notes. The CFIB is already hearing from some of its 100,000 members that they’ve had to permanently shut down their businesses while many say they won’t be able to make their next pay cycle, he says.

“In six weeks, we’re going to lose too many companies,” Grant says. “We would urge the government to find ways of getting cash to them quickly.”

By Mark Lowey
Published on April 8, 2020