Small-business groups are asking the federal government to extend the deadline for repaying Canada Emergency Business Account loans, as few of the loans have been paid back.
On April 9, 2020, Ottawa announced the creation of the CEBA program, bringing in 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 date for the interest-free loans, partially forgivable, was Dec. 31, 2022, and after that, businesses would start paying interest and forfeit the forgivable portion of the loans. Last year, Ottawa extended the deadline to 12 months, citing the challenges posed by the Omicron variant.
Many of the loans have been outstanding for almost three years, but most are still outstanding. Export Development Canada, the crown corporation that manages CEBA, said that just 13 percent, or $5.7 billion, were repaid as of the end of November, 2022. First, EDC provided these figures 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 hadn't yet repaid their CEBA loans were not sure they ever could. About 30 percent of its members had debt of more than $100, the largest in the nation's history.
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 current rules, CEBA loans have a value of $40,000 or $60,000 and are subject to interest-free and partly forgivable if the balance is repaid by Dec. 31, 2023. After that, the forgivable portion is forfeited, interest begins to accrue at a five-percent rate, and the loan goes to collections if not repaid in full by Dec. 31, 2025.
Restaurants Canada has proposed 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 U.S. government to extend the loan-forgiveness deadline to Dec. 31, 2024.
The group is also asking the state government to extend partial loan forgiveness to the 50,000 businesses that were only told last fall they never should have gotten a CEBA loan in the first place and have to repay the full amount.
The budget for the US is due 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 on EDC's Canada account shows that financial institutions were also paid a total of $92 million in administrative fees in that fiscal year.