Just Started or Thinking About Starting Your Own Practice? Be prepared to weather the second wave of COVID without much government support

  • 30 septembre 2020
  • Anna Malazhavaya

Planning your new law practice’s finances is always stressful, and it’s even more nerve-wracking in the post-COVID era. What if there is another lockdown? If I hire an employee now, can I afford to keep them if my revenues drop because of the second wave? Can I afford a brick and mortar office?

These worries are not unique to recently created and new legal practices, of course. No business, new or established, no industry is immune from an economic slowdown. However, businesses created before 2020 may rely on a substantial support from the government to help them through the turbulent times, whereas post-2020 businesses get almost no help.

CEBA $40,000 Loan is not Available to Recently Created Businesses

The Canadian Emergency Business Account program ("CEBA") was designed to help businesses by providing “financing for their expenses that cannot be avoided or deferred as they take steps to safely navigate a period of shutdown.” Businesses can receive up to $40,000 in an interest free loan until December 31, 2022. Businesses who repay 75% of the loan before December 31, 2022, will have 25% of the loan forgiven. 

The CEBA loan is only currently available to the businesses that either paid salaries (between $20,000 and $1,500,000) in 2019 or incurred at least $40,000 in non-deferrable expenses. If you started your practice at the end of 2019 or later, you probably don’t meet either criteria and will not qualify for CEBA.

Notably, CEBA eligibility does not depend on how seriously the business was affected by the pandemic: manufacturers of hand sanitizers and medical masks may be enjoying the best financial year of their financial lives and may still qualify for an up to $40,000 interest free CEBA loan and up to $10,000 debt forgiveness.

At the same time, a struggling sole practitioner who rented an office and hired a part-time assistant with a salary of $20/hour in, say, September 2019 will not qualify for CEBA if their “eligible non-deferable expenses,” as the term is defined in the rules, are less than $40,000. 

Businesses that have not filed their 2018 or 2019 tax return are not eligible for CEBA regardless of how badly they are affected by the pandemic.