Nearly a quarter-million small businesses across Canada risk permanent closure as the deadline to repay pandemic-era loans fast approaches, warns a report from the Canadian Federation of Independent Business (CFIB).
Nearly 900,000 Canadian businesses signed up for Canada Emergency Business Account (CEBA) loans during the COVID-19 pandemic, as closures and restrictions tanked revenues and risked their futures.
The program allowed businesses to receive interest-free loans of up to $60,000, of which $20,000 would be forgiven if they were able to complete repayment by the end of 2023.
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But many businesses are still not in a position to make those payments in time, according to Corinne Pohlmann, senior vice-president of national affairs with CFIB.
“Many are starting to worry they’re still not in a place where they’re able to pay it back because of the economy,” said Pohlmann. “They’ve taken a big hit, having accumulated huge amounts of debt during the pandemic, and then, as they came out of that, facing some pretty big challenges, including inflation, supply chain challenges and labour shortages.”
In its new report, Back in Business? Spring Update on Small Business and CEBA, CFIB found that 43 per cent of businesses that received a CEBA loan risk missing the current deadline, with small businesses in the arts, recreation, hospitality, and social services sectors hit the hardest.
Of those businesses that said they will meet the deadline, half said they will struggle to do so, and two-thirds would like to see an extension.
“They are going to have to look at potentially closing their doors or significantly cutting back on business because they’re already in a lot of debt and, for many of them, this will just add to the debt load they already have,” Pohlmann said.
If the deadline remains unchanged, Pohlmann said CFIB is looking at a significant wave of small business closures nationwide.
“If you lose almost one in five of those businesses, that could have a significant impact to the economy broadly and the community where those businesses employ individuals,” she said. “They may end up taking away a service that’s been integral to the community simply because they just can no longer pay their bills.”
Pohlmann said CFIB is calling on the federal government to extend the repayment deadline to the end of 2024, or even to the end of 2025.
The deadline has already been extended once, from the original date of Dec. 31, 2022. While the door to negotiate remains open, Pohlmann said it’s possible the federal government may be less receptive to another delay.
“I think, more and more, the government is hearing this message, not just from us but from their local constituents and small businesses in their community,” she said. “There is empathy towards what’s happening. I think this year is a bit more challenging, but I don’t think the doors are closed on doing it yet.”
With the deadline fast approaching, Pohlmann said the sooner businesses get answers, the better.
Ottawa businesses are among those worried about the rapidly approaching CEBA deadline.
In an email to OBJ, Michelle Groulx, executive director of the Ottawa Coalition of Business Improvement Areas (OCOBIA), said it’s “critical” for the federal government to extend the deadline to the end of December 2024 or 2025.
“Most businesses say they will pay by the end of the year to get the forgiveness, but it is a matter of debt transfer, not due to high revenues and profits that allow this payment,” she wrote. “It will severely impact businesses in a negative way.”
In March, OCOBIA surveyed 128 Ottawa businesses, most of which were small businesses with less than 10 employees.
Nearly 70 per cent of respondents said their revenues were worse than 2019. And while 57 per cent said they intended to repay their CEBA loan in full by the end of 2023, 87.5 per cent said doing so would impact their business. Those impacts included worries that they would be unable to reinvest in their business (63.3 per cent) or that they may be forced to close (43 per cent).