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Built in Weeks, Relief System for Canadian Businesses Goes Live

Built in Weeks, Relief System for Canadian Businesses Goes Live

(Bloomberg) -- For Canada’s small businesses, this is the first day they can tap their banks for interest-free loans under a C$25 billion ($18 billion) government relief program meant to counter disruptions from the coronavirus pandemic. For Andrew Irvine, it will be a test.

Irvine, chairman of a cross-industry group of more than 20 lenders working on the program, and his colleagues are about to find out if an application process built from scratch in less than three weeks can withstand an expected onslaught of demand. Last week’s debut of a similar program in the U.S. was fraught with a barrage of applications, a lack of clear rules and an overwhelmed system.

“We do expect incredibly heavy volume, but we believe our solution is going to hold up well,” said Irvine, also head of Canadian business banking at Bank of Montreal. “Canada’s done a great job in getting this done in a really short period of time, and when we look back on this I think that Canada’s going to look pretty good on a global basis.”

Canadian lenders are now accepting applications for the Canada Emergency Business Account, a government-guaranteed loan of as much as C$40,000 that’s interest free through 2022. Of that amount, 25% is eligible for forgiveness as long as C$30,000 is paid back by the end of that year. It’s among the government relief measures unveiled worldwide amid a pandemic that’s disrupted commerce, upended economies and taken more than 88,000 lives globally.

“There’s very, very significant demand for this,” Irvine said in an interview. “For any company that has experienced significant revenue shortfalls in the last three weeks as a result of social-distancing measures introduced to prevent the spread of Covid-19, this is really the first piece of stimulus hitting the system.”

Early Hours

Prime Minister Justin Trudeau announced the plan on March 27, targeting a mid-April rollout. That left banks and the government mere weeks to build something from scratch, a challenge even in normal times. Yet, as of Wednesday, all of Canada’s six biggest lenders said they’re ready to accept applications starting Thursday.

“We’ve probably done six to nine months’ work in 2 1/2 weeks,” Irvine said. “I’ve been up to the early hours in the morning many days in the last couple of weeks, and I am certainly not alone in that.”

Bank of Montreal, like other Canadian lenders, turned to technology to automate the application process. The goal is for the application to take less than five minutes online, with approval given immediately. In most cases, funds will be deposited directly into a client’s account within five business days, with no need to visit a bank branch or phone a call center.

Toronto-based Bank of Montreal has emailed more than 300,000 small-business clients to let them know about the program and encourage them to apply. The response has been overwhelming already, Irvine said, and he estimates that 200,000 customers will sign up for loans.

“There’s no reason why any business, frankly, that is eligible should not apply,” Irvine said.

©2020 Bloomberg L.P.