Business groups urge Canadian government to extend debt repayment deadline

Business groups urge Canadian government to extend debt repayment deadline

More than 250 businesses are calling on the federal government to extend the repayment deadline for Canadian Emergency Business Account loans.

CEBA was the first and most widely utilized support for businesses in the early months of the COVID-19 pandemic. Ottawa extended loans of $40,000 or $60,000 to nearly 900,000 businesses, for a total of $49 billion in credit. As of March 31, only about a fifth of the loans were repaid.

If a business repays its loan by Dec. 31, the amount of the loan will be forgiven, depending on the size of the loan. As of January 1, no amount will be forgiven, and interest will begin to accrue at the rate of 5 percent.

A coalition of 256 groups, led by the Canadian Chamber of Commerce, the Canadian Federation of Independent Business, Restaurants Canada and the Tourism Industry Association of Canada, wrote to Finance Minister Chrystia Freeland on Monday to request the government extend that first repayment deadline by two years to Dec. 31, 2025.

The groups contend that small business owners are still grappling with financial difficulties, such as inflation and high interest payments on other debt they took on during lockdowns.

Freeland's office said CEBA did its job in helping businesses weather the early months of COVID.

Some lenders offer to refinance CEBA loans as Ottawa's repayment deadline looms.

Food services businesses are still struggling to be profitable because of increased expenses and staffing difficulties, says Kelly Higginson, president of Restaurants Canada.

She called on Statistics Canada data that businesses in the sector were closing at faster rates than before and fewer were opening. In March, the agency found that 2,026 businesses in accommodations and food services opened, compared to 2,516 that closed. In the 12 months of March 31, the most of any industry, there were 593 insolvencies.

Higginson said she keeps hearing from restaurant owners who feel ready to throw in the towel and regret holding on as long as they have. If I had only known that I would never have taken out the first loan or the second line of credit or kept going for another six months, she said.

Beth Potter, president of the tourism association, said she hopes to see domestic travel return to 2019 levels within the next 12 months, but international travel is still below prepareandemic levels. This is a number of years of lost revenue that is very difficult for companies to make up.

Nanos Research surveyed tourism businesses in April and May on behalf of the association, finding that 55 percent were not confident or somewhat not confident that they could make their debt payments over the next two years.

The majority of small and medium-sized businesses use the government pandemic programme, according to a Statistics Canada study published in January.

For example, a million small businesses received a total of $109-billion in aid, half of which were loans, while 3,515 large businesses received a total of $33-billion, mostly from the federal wage subsidies.

A separate study published in March found that the majority of CBA recipients were operating in industries that were most affected by lockdowns, such as food services and tourism.

Women and racialized entrepreneurs are more likely to own businesses in those industries. A separate group of companies wrote to the government last week arguing that those demographic factors should encourage the government to extend the repayment deadline for the CEBA debtors.