Access to Capital
In order to succeed, local franchised business owners need access to the financial support that will help them start their business on the right foot and weather the challenges that small businesses face. To help ensure this support, the CFA is advocating for the following actions:
Implement Changes to the CSBFP
In the 2021 budget (passed in June 2021), the federal government made several significant changes to the CSBFP which will make a good program even better.
These changes include:
- increasing the maximum loan amount
- expanding the list of eligible expenses, and
- creating a working capital line to help new businesses finance their day-to-day operations.
Unfortunately, the implementation was stalled by the federal election.
Thousands of new businesses across Canada regularly take advantage of the Canada Small Business Finance Program.
The new measures in the program will make a great program work even better, which is why the federal government must make it a priority to implement these changes as quickly as possible.
Allow RRSP Withdrawals for New Business
Allow RRSP withdrawals for the purchase of a new or existing business:
This proposal, similar in structure to the Home Buyers Plan, would allow individuals who are ready, willing, and able to start a business to unlock some of their retirement savings to purchase a new or existing business.
Our proposal would allow individuals to withdraw up to $100,000 from their RRSP/RESP accounts to make a down payment on the purchase of a new or existing business, without having to pay tax on the withdrawal.
It would require the individual to repay, on a non-deductible basis, the amount withdrawn over a period not exceeding 15 years, beginning the second calendar year following the calendar year in which the withdrawal was made.
This proposal should not allow for the refinancing of an existing business. For businesses looking to refinance their operations, there are already a significant number of government support programs and finance opportunities within Canada’s banking system.
The United States allows individuals to borrow from their 401(k) accounts to help capitalize a new business endeavour. The IRS rules allow individuals to borrow the lesser amount of:
- $50,000; or
- Half of your vested balance.
Create a new program that would allow individuals to withdraw up to $100,000, from their RRSP/RESPs to make a down payment on the purchase of a new or existing business without having to pay tax on the withdrawal.
Increase the Small Business Deduction Threshold
We do appreciate that the government has reduced the tax rates on small businesses, in an effort to keep them competitive.
One of the big challenges that small businesses face is bracket creep, which occurs when inflation pushes businesses into higher tax brackets or reduces the value of credits and exemptions. The current small business threshold has been kept at $500,000 for a decade.
We believe that this threshold is too low and needs to be raised to $650,000 to be in line with the consumer price index (CPI) over the same period.
Similar bracket creep has been addressed for personal tax rates. However, corporate taxpayers are still being penalized.
Increase the small business threshold to $650,000 and index the threshold to the CPI.