New HASCAP guidelines

In the Fall Economic Statement, the federal government announced it would work with financial institutions to develop a financing program to help Canadian-based businesses that have been highly affected by the pandemic. The program, which was officially launched on Feb. 1, is called the Highly Affected Sectors Credit Availability Program (HASCAP). This program is available until June 30, 2021, and applications will be accepted at participating financial institutions. There are various businesses that are not eligible for the program, which are listed in the appendix.

The HASCAP provides successful applicants with access to a non-revolving government guaranteed term loan from $25,000 up to a maximum amount of $1 million to assist with financing their day-to-day operating costs.

Details of the term loan are as follows:

• 4 per cent annual fixed interest rate;
• Amortization period up to 10 years; and
• Up to a 12-month postponement on principal repayments from the date of the loan advance.

In order to qualify for the HASCAP guaranteed loan, the business must have been in operation on March 1, 2020, and it must have a 50 per cent decline in revenue for at least three of the last eight months prior to the HASCAP application. This decline in revenue must be verified in one of two ways:

1. Your business has received or will receive¹ the Canada Emergency Wage Subsidy (CEWS) or the Canada Emergency Rent Subsidy (CERS) demonstrating it meets the decline in revenue test. This will require providing the attestation form, proof of the revenue decline and payment of subsidy; or
2. Your business does not qualify for CEWS and CERS, and it must provide financial statements demonstrating it meets the decline in revenue test.

An application can be submitted through your primary financial institution for each legal entity you own, up to a maximum combined amount of $6.25 million (all legal entities combined). Minimum risk ratings will apply and vary based on the size of the loan available. The funds received through the HASCAP will have the following restrictions:

• The loan must be used to continue or resume operations; and
• The loan cannot be used to pay or refinance existing debts.

Additional restrictions or criteria may be imposed by the individual financial institutions. It is very important to read the formal loan agreement provided by your primary financial institution to understand all the conditions and restrictions related to the loan.

The HASCAP guaranteed loan could be very useful for businesses that have suffered sufficient revenue loss and are struggling with their cash-flow needs.  Consult with your Baker Tilly advisor if you have any questions about the HASCAP guaranteed loan or other financing options available.

Appendix

The following businesses are not eligible for the HASCAP guarantee:

• Businesses whose revenue model is based on non-commercial sources such as direct government funding or private donations;
• Government organizations or bodies (other than an Indigenous entity or body) as well as entities in which a government organization or body (other than Indigenous entities or bands) owns equity interests;
• Non-profit organizations, registered charities, unions, or fraternal benefit societies or orders, or a Person² in which any such organization owns equity interests (except if it is actively carrying on a business in Canada – including a related business in the case of a registered charity – that earns revenue primarily from the regular supply of property/goods or services and not from non-commercial sources such as direct government grant funding or private donations);
• Religious organizations, or a Person in which any such organization owns equity interests;
• Fundraising vehicles for charities;
• A Person in which equity interests are held by any single current member of the Parliament of Canada or any single current member of the Senate of Canada other than a Person whose equity interests are publicly traded;
• Entities that operate any form of sexually exploitive business or promote violence, incite hatred or discriminate on the basis of race, national or ethnic origin, colour, religion, sex, age or mental or physical disability; and
• Businesses that have been determined to have committed tax evasion.