Federal relief loans issued for small businesses during lockdown are almost due
Small-business groups are asking the federal government to further extend the deadline for repaying Canada Emergency Business Account (CEBA) loans when the budget is tabled later this month, as few of the loans have been paid back.
Ottawa announced the creation of the CEBA program on April 9, 2020, and sent more than $49-billion to almost 900,000 businesses. It was the first and most widely used pandemic support program for businesses.
The original repayment deadline for the interest-free, partially forgivable loans was Dec. 31, 2022; after that, businesses would start paying interest and forfeit the forgivable portion of the loans. Last year, citing the challenges posed by the Omicron variant, Ottawa extended the deadline by 12 months.
But almost three years after the program began, most of the loans are still outstanding. Export Development Canada, the Crown corporation that oversees CEBA, said that just 13 per cent, representing $5.7-billion, were repaid as of the end of November, 2022.
Many of those businesses are still struggling with debt incurred during the pandemic, business groups say.
Dan Kelly, president of the Canadian Federation of Independent Business (CFIB), which lobbies on behalf of more than 95,000 small businesses, said his feeling is that Ottawa would like to turn the page on pandemic support programs. But that ignores the fact that debt is still a live issue for many businesses.
“While I’m sympathetic to that view – I never want to speak about COVID ever again – I don’t think that’s a wise idea because of the anchors of debt hanging around the necks of hundreds of thousands of small business owners right now,” he said.
There is no post-pandemic normal for one Ottawa small business owner Lucas Nault.
“The pandemic has destroyed my business, and my life,” he said.
Part of one of the hardest-hit industries, his Lucas Nault Hair Studio on Somerset Street at Ottawa was often locked down during the pandemic.
He turned to CEBA early, with a $60,000 dollar Canada Emergency Account Loan helping him survive, at least temporarily.
“We’re at a point now where the debts are coming due, and the money is just not coming in the way it did pre-pandemic. Yet, they expect those things to be paid off quickly, and it’s just not a possibility – we’re going to see a lot of businesses close this year,” he said.
For eligible CEBA borrowers in good standing, repaying the balance of the loan on or before Dec. 31, 2023 will result in loan forgiveness of up to 33 per cent, up to $20,000. But Nault says other debts have piled up too, including taxes payable to the Canada Revenue Agency.
“And there’s no way I can pay my people, pay my debt, and pay the government at the same time. It’s just not feasible.”
He’s not the only one in this situation. OCOBIA, the Ottawa Coalition Of Business Improvement Areas conducted a survey of small businesses that sheds light on how small businesses are faring.
The majority are small businesses who have been operating for more than 6 years, and have less than 50 employees.
Among them, 69.5 per cent respondents reported that revenues were worse (this year) than 2019. 57 per cent intend to pay the full CEBA repayment by Dec. 31, 2023 to receive the 33 per cent debt forgiveness.
And 87.5 per cent say the CEBA loan repayment in full by Dec. 31 will impact business.
“What many businesses said, that if they are going to pay it back, it’s going to impact their growth; so, they will not be able to take that money and reinvest it into their business, they may have to lay off staff in order to payout, and some may just in fact close,” says OCOBIA Executive Director Michelle Groulx.
Groulx says many businesses would like to see a deadline extension or a greater portion of the loan forgiven.
“Understanding that when they did take this loan, nobody knew how long this battle was going to be and how hard they were going to be hit.”
And the hits continue — with labour shortages, and ongoing supply chain issues.
“Supply chain and labour shortages don’t just hurt existing businesses, but also businesses who are working to open,” says Judy Lincoln, Westboro Village Executive Director. “It takes longer to get your fit-ups done when you’re waiting for shelving units to arrive, for display units to arrive, when you’re trying to secure contractors.”
As for Nault, after 18 years in business – he says he’s hanging on by a thread.
“I’m not looking for handouts. I just want this problem to be solved properly by the government.”
The CFIB is asking the government to extend the loan-forgiveness deadline to Dec. 31, 2024.
Part of the article was reported by CTV News.