The federal government announced Thursday it will be phasing out its annual $5,000 annual loan for small business owners, saying it’s time to start investing more in your credit history.
“The federal government has not provided an adequate amount of support to small businesses for the past three years,” Finance Minister Bill Morneau said at a news conference in Toronto.
“This is the right time to invest in your ability to secure a mortgage, get an investment loan, or take advantage of other options.”
The government is providing a $5-per-year loan for new and existing small business holders for five years.
It will be phased out after five years, according to a release from Morneau’s office.
“We will continue to invest through the end of 2017,” Morneau added.
“And I would encourage you to consider refinancing or reducing your credit score to help you meet your financial goals.”
In 2017, there were 3.6 million Canadians with credit scores below 660.
The government says about 15% of Canadians have a high credit score, but the majority of people are either below 660 or have a low credit score.
This means they’re unlikely to qualify for a loan.
It’s a big change for the federal government.
The federal Liberals, in their last election campaign, pledged to end the $5 annual loan.
Morneau says the government will not provide any financial assistance to those with a low score, such as those with no credit history, and people with high scores.
Moruens office says this decision will help the government’s “financial strength” and help small businesses better compete in a competitive global economy.
“It will help to attract and retain new, qualified talent and help ensure our economy is resilient,” Morneys office said.
The Liberal government says it will increase investments in the small business loan program.
The announcement comes as the federal Liberals are trying to lure more small business to Canada by promising to help them borrow $100 million over five years through the Canadian Business Loan Program.
The Liberals announced the plan in January, saying they would help small business start-ups get started.
“I think we’ve seen a lot of the same mistakes in the past that I think will get us nowhere,” Liberal Leader Justin Trudeau said at the time.
“When we look at the future, we’ve got to be very, very cautious, because we don’t want to be spending a lot more on infrastructure.”
The Liberals also promised to build more jobs, and that they would “take the pressure off” smaller businesses by “investing in infrastructure.”
On Thursday, Morneau also said the government would work with the provinces to ensure more Canadians can qualify for the annual loan program by the end, which will be capped at $3,000 per year.
Mornees office says it is the only federal government program that will provide a credit score that is more than 660.
That’s why the federal budget will have more details on how to manage that money.
“Every dollar that the government invests in small business is a dollar that we don`t spend on infrastructure,” Morrens office said in a release.
“For that reason, the government is ensuring that the small businesses with the most assets can qualify through the credit program.”
It also said that the $1,500 annual loan will be available to new applicants.
This is the first time the government has offered a credit scoring option to its small business applicants.
Morreau also said he expects the federal NDP government will announce a “federal plan to expand the federal loan program to assist small businesses” in the coming months.