Ottawa

Loan program 'loophole' could sink Ottawa swimsuit maker

The co-owner of an Ottawa custom clothing manufacturing business is angry he's being shut out of a program that could help his company survive the COVID-19 lockdown.

Because TaggerWear hires contractors, its owners can't apply for federal CEBA loan

Some of TaggerWear's custom-made swimsuits for synchronized swimmers. (Facebook/TaggerWear)

The owners of a small Ottawa company that makes custom swimsuits and dance apparel say they're being shut out of a federal aid program that could help their business survive the coronavirus pandemic, all because their workers are contractors, not employees.

Seventeen years ago, James Careless and his wife Susan Trott began making swimsuits in their bedroom because they couldn't find one to fit their daughter, a competitive swimmer.

In 2017, with demand for their products growing, they moved their company, TaggerWear, into a $3,000-a-month rented warehouse space in Nepean, spending tens of thousands of dollars more on sewing and printing machines.

"We literally nurtured this business from our home. There's a lot of heart tied up in this," Careless said.

TaggerWear suspended operations in mid-March when non-essential businesses were asked to close because of the pandemic.

The couple was initially relieved to learn about the federal Canada Emergency Business Account (CEBA) loan program for small- and medium-size businesses affected by the pandemic, but soon discovered their company doesn't qualify because they hire contractors to sew their clothing on an as-needed basis.

TaggerWear also makes dancing attire at its rented commercial space in Nepean. (Submitted by James Careless)

Payroll 'loophole'

Because TaggerWear doesn't have a payroll in the traditional sense of the word, its owners can't file an application for a CEBA loan. 

"This is a loophole, and [the government is] hung up on that payroll form that many businesses just don't use," Careless said, adding the company's contractors work nearly full-time hours and earn above minimum wage.

This just guts our line of credit, and at this rate we're not going to make it. It's just that simple.​​​​​​- James Careless, TaggerWear

"They could just ask us to show how much we've been paying our contractors. We have that data," Careless said. "We file it when we do our taxes." 

Meanwhile, there are no orders coming in, and the company has to keep paying rent. 

"This just guts our line of credit, and at this rate we're not going to make it. It's just that simple. We won't make it to the fall. We may make it one more month," Careless said.

Canadian Federation of Independent Business president Dan Kelly in a 2016 interview. (CBC)

Federation applying pressure

The president of the Canadian Federation of Independent Business agrees the lack of options for companies that hire contract workers is a significant gap in the CEBA program.

"Small business owners are calling us absolutely frantic because they don't qualify for this program," Dan Kelly said.

Kelly said 20 per cent of Canada's 1.4 million small- and medium-size businesses don't qualify for the loan program because they either pay employees in dividends, or bring in contractors.

"I'm very worried about very small, micro-sized businesses that are so vulnerable," Kelly said. "They need the loan program."

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Kelly said the federation is pressing the government to allow companies to provide evidence they're paying workers in other ways.   

"I think we need to be creative and ensure that business owners can meet the objective of the program without getting caught by red tape," he said.

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