Small businesses are asking the federal government to extend the deadline for repaying Canadian 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 first and most widely used pandemic support program for businesses, it was the first.
The original repayment date for the interest-free, partially forgivable loans was October 31, 2022, and after that, businesses would start paying interest and forfeit the forgivable portion of the loans. Ottawa extended the deadline by 12 months last year due to the challenges posed by the Omicron variant.
Most of the loans are still outstanding three years after the program began. Export Development Canada, the crown corporation that oversees CEBA, told The Globe and Mail that just 13 per cent, representing $5.7 billion, were repaid as of the end of November, 2022. The CBC first provided these figures to EDC.
Many of those businesses are still struggling with debt incurred during the pandemic, business groups say.
Olivier Bourbeau, Restaurants Canada's vice-president of Quebec and federal affairs, said his association recently surveyed its members and found that 20 percent of those who hadn't yet repaid their CEBA loans were not sure they ever could. About 30 percent of its members reported having significant debt related to the pandemic.
Data from the Office of the Superintendent of Bankruptcy shows that there were 533 insolvencies in the accommodation and food-services sector in the 12 months end Jan. 31, up from 377 in the prior 12 months, an increase of 41 per cent.
Under the current rules, CEBA loan amounts can range from $40,000 to $60,000 and are interest-free and partly forgivable if the balance is repaid by Dec. 31, 2023. The forgivable portion of the loan is forfeited, interest begins to accrue at a 5per cent rate, and the loan goes to collections if not repaid in full by Dec. 31, 2025.
Restaurants Canada has proposed that the government 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. Bourbeau said 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 is asking the government to extend the loan-forgiveness deadline to Dec. 31, 2024.
The group also wants the government 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 had to repay the full amount.
The federal budget is expected to be tabled on March 28.
EDC spokeswoman Louis-Antoine Paquin saidCEBA was created in partnership with private companies, making it challenging to track repayments.
A 2020-21 report shows that financial institutions were also paid a total of $92 million in administrative fees in that fiscal year.