Canadian banks to get millions in funds to administer government COVID-19 loan program for small businesses | Canada News Media
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Canadian banks to get millions in funds to administer government COVID-19 loan program for small businesses

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OTTAWA — Canada’s banks are likely to get tens of millions of dollars for managing the government’s loan program designed to get money in the hands of small businesses.

The government launched the Canada Emergency Business Account (CEBA) program on April 9, allowing businesses to apply for up to $40,000 in interest-free, government backed loans through their banks. If businesses manage to pay 75 per cent of the loan back by Dec. 31, 2022, the remaining 25 per cent of the loan will be forgiven.

Businesses also had to have a payroll of between $20,000 and $1.5 million to qualify for the program.

All of Canada’s major banks have programs up and running to help customers apply for the program and to date $15.3 billion has been extended to businesses across the country.

Under the previously undisclosed terms of the arrangement with banks, the financial institutions will get 0.4 per cent of any outstanding balances in the program per year. If for example, the $15.3 billion that has been paid was still outstanding at the end of the first year, banks would receive just over $60 million.

The program was part of a host of support efforts for small businesses, which has also included the wage subsidy program and an initiative for rent relief that was announced last week.

Anna Arneson, a spokesperson for the ministry of finance, said the fee is intended to cover the banks’ cost administering the program including keeping clients updated on their balances.

They are not going to pay it early because they are going into a slow economy and they’re going to need that cash flow

“The fee is intended to reflect the cost of service of the financial institutions providing the loan, for the duration of the loan’s lifetime, in a manner similar to how a financial institution would treat loans that it underwrote,” she said in an email. “It is not intended to include a profit margin for the financial institutions.”

She said the government is also doing an independent review of the program and if the costs to the bank are lower than initially estimated their fee can be reduced.

NDP MP Gord Johns said Canada’s banks could have taken on this program without charging the government, recognizing that it would help many of their customers to get money in their pockets.

“It would have been a generous offer if they said we are going to administer it, this is something we can do,” he said. “The big banks haven’t come to the table and they need to.”

Johns said most businesses will need the cash over the next few years and won’t rush to repay the loan allowing banks to gather these fees for several years.

“They are not going to pay it early because they are going into a slow economy and they’re going to need that cash flow.”

He said he has been disappointed banks have only made small reductions to interest rates and he has heard from many constituents who feel the banks could be doing a lot more to help.

“I am getting calls from small businesses that aren’t able to defer mortgages for more than a month, that aren’t able to access lines of credit.”

He said the government should have taken a tougher stance with banks to get more support to individual Canadians.

“The government had to have a more difficult and harder conversation with the big banks.”

The Conservatives have also criticized the program for excluding family-run businesses by requiring that people applying have a payroll, noting many family-run businesses pay family members with dividends.

Mathieu Labrèche, a spokesperson for the Canadian Bankers Association, said the government worked with banks to ensure the money could get out the door to businesses quickly. He said banks have worked very quickly and are only covering their costs with the program.

“Canada’s financial institutions will continue to support the program on a cost recovery basis throughout,” he said.

Labrèche said the government has asked for the banks’ help with a number of programs, including the wage subsidy and they have done so eagerly.

“Having banks deliver these programs costs far less and is more efficient than having the government do so on its own,” he said.

Labrèche also pointed to similar programs in the United States that are costing a lot more. The American Small Business Administration is backing larger loans to businesses there, but banks in the U.S. are receiving larger fees.

For loans of less than $350,000 U.S. banks can charge a fee of five per cent on the loan, that percentage does decline when the loans become larger, but even with loans of more than $2 million banks charge a one per cent fee.

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Source:- National Post

Edited by Megan Johnson

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Netflix’s subscriber growth slows as gains from password-sharing crackdown subside

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Netflix on Thursday reported that its subscriber growth slowed dramatically during the summer, a sign the huge gains from the video-streaming service’s crackdown on freeloading viewers is tapering off.

The 5.1 million subscribers that Netflix added during the July-September period represented a 42% decline from the total gained during the same time last year. Even so, the company’s revenue and profit rose at a faster pace than analysts had projected, according to FactSet Research.

Netflix ended September with 282.7 million worldwide subscribers — far more than any other streaming service.

The Los Gatos, California, company earned $2.36 billion, or $5.40 per share, a 41% increase from the same time last year. Revenue climbed 15% from a year ago to $9.82 billion. Netflix management predicted the company’s revenue will rise at the same 15% year-over-year pace during the October-December period, slightly than better than analysts have been expecting.

The strong financial performance in the past quarter coupled with the upbeat forecast eclipsed any worries about slowing subscriber growth. Netflix’s stock price surged nearly 4% in extended trading after the numbers came out, building upon a more than 40% increase in the company’s shares so far this year.

The past quarter’s subscriber gains were the lowest posted in any three-month period since the beginning of last year. That drop-off indicates Netflix is shifting to a new phase after reaping the benefits from a ban on the once-rampant practice of sharing account passwords that enabled an estimated 100 million people watch its popular service without paying for it.

The crackdown, triggered by a rare loss of subscribers coming out of the pandemic in 2022, helped Netflix add 57 million subscribers from June 2022 through this June — an average of more than 7 million per quarter, while many of its industry rivals have been struggling as households curbed their discretionary spending.

Netflix’s gains also were propelled by a low-priced version of its service that included commercials for the first time in its history. The company still is only getting a small fraction of its revenue from the 2-year-old advertising push, but Netflix is intensifying its focus on that segment of its business to help boost its profits.

In a letter to shareholder, Netflix reiterated previous cautionary notes about its expansion into advertising, though the low-priced option including commercials has become its fastest growing segment.

“We have much more work to do improving our offering for advertisers, which will be a priority over the next few years,” Netflix management wrote in the letter.

As part of its evolution, Netflix has been increasingly supplementing its lineup of scripted TV series and movies with live programming, such as a Labor Day spectacle featuring renowned glutton Joey Chestnut setting a world record for gorging on hot dogs in a showdown with his longtime nemesis Takeru Kobayashi.

Netflix will be trying to attract more viewer during the current quarter with a Nov. 15 fight pitting former heavyweight champion Mike Tyson against Jake Paul, a YouTube sensation turned boxer, and two National Football League games on Christmas Day.

The Canadian Press. All rights reserved.

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