Small-business groups are asking the federal government to extend the deadline for repaying Canada Emergency Business Account loans when the budget is tabled later this month, as few of the loans have been paid back.
On April 9, 2020, Ottawa announced the creation of the CEBA program, and sent more than $49 billion to almost 900,000 businesses. The pandemic support program was the first and most widely used for businesses, he said.
The original repayment deadline for interest-free, partially forgivable loans was Dec. 31, 2022, when companies would start paying interest and forfeit the forgivable portion of the loans. Ottawa extended the deadline by 12 months last year, citing the challenges posed by the Omicron variant.
The program has since ended, and almost three years after, most of the loans are still outstanding. Export Development Canada, the crown corporation that manages CEBA, said it was repaid just 13 per cent, or $5.7 billion, as of the end of November, 2022. EDC first provided data to the CBC.
Many of those businesses are still struggling with debt incurred during the pandemic.
Restaurants Canada's vice-president of Quebec and federal affairs, Olivier Bourbeau, said his association recently surveyed its members and found that 20 percent of those who have not yet repaid their CEBA loans were not sure they ever could. About 30 percent of its members reported having pandemic-related debt of more than $100,000.
Data released by the Office of the Superintendent of Bankruptcy show that there were 533 insolvencies in the accommodation and food-services sector in the 12 months ending Jan. 31, up from 377 in the prior 12 months.
Under the current rules, CEBA loans are worth either $40,000 or $60,000 and are interest-free and partly forgivable if the balance is repaid by Dec. 31, 2023. If the loan is not repaid in full by Dec. 31, 2025, the forgivable portion is forfeited and interest begins to accrue at a 5 percent rate, and the loan goes to collections if not repaid in full by Dec. 31, 2025.
The government has proposed that restaurants Canada phase out the loan forgiveness over six-month periods, so that even financially strapped businesses that can't meet the 2023 deadline can still benefit from some forgiveness. This would help resolve one of CEBA's problems - namely, that businesses in the best financial shape right now are more able to reap the benefits of the program than those that need help the most.
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.
The CFIB wants the government to extend the loan-forgiveness deadline to Dec. 31, 2024.
The group is also asking the state to extend partial loan forgiveness to the 50,000 businesses that were only told last fall that they never should have gotten a CEBA loan in the first place and have to repay the full amount.
The federal budget is expected to be tabled on March 28.
EDC spokeswoman Louis-Antoine Paquin said CEBA was created in partnership with private companies, making it challenging to track repayments.
A 2020-21 report of EDC's Canada Account shows that financial institutions were also paid a total of $92 million in administrative fees in that fiscal year.