Top business group downplays CEBA loan repayment concerns

Canadian Chamber of Commerce takes optimistic view on ability of small business to repay loan, but CFIB disagrees

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Concerns raised by some small businesses about a pandemic-era loan that’s due in a month may not be the “full-blown crisis it’s been presented by many to be,” says the Canadian Chamber of Commerce, countering the view of one of the country’s largest association of small businesses.

“It’s hard to say this (loan) program hasn’t served its intended purpose,” Matthew Holmes, a senior vice-president at the Canadian Chamber of Commerce, said in a statement. “For the majority of businesses, it appears to have been the support they needed from government, when they needed it the most.”

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However, he also said some small businesses will continue to face hardships and struggle to return to pre-pandemic levels, and urged the government to better support them by looking into their unique obstacles in repaying Canada Emergency Business Account (CEBA) loans.

CEBA provided loans up to $60,000 to around 900,000 small businesses until June 2021 to help tackle the economic impacts of the pandemic. The conditions on repaying the loan have been changed as businesses warned they are still struggling to recover.

Until September, repaying the loan by Dec. 31, 2023, would have allowed businesses to receive a loan forgiveness grant of up to $20,000. Failing to pay it off would lead to interest of five per cent per year being charged on the loan and the full principal would be due Dec. 31, 2025.

The government in mid-September extended the loan repayment deadline by a year to Dec. 31, 2026. But the deadline to meet the condition for the forgiveness grant was pushed out by just 18 days to Jan. 18, 2024.

Small businesses have repeatedly urged the government to further extend the deadline. The federal government, though, hasn’t shown any signs of providing more leeway yet.

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Businesses that can’t repay the loan by January can extend the deadline to qualify for the partial loan forgiveness to March 28 by making a refinancing application with the institution that provided their CEBA loan by Jan. 18, 2024, but critics say the move just encourages businesses to take one loan to pay the other.

The chamber’s optimistic view relied on previously released data by Statistics Canada that said 65.6 per cent of businesses anticipate repaying the CEBA loan by Dec. 31, 2026. Of businesses that received the loan, 71.8 per cent had not paid it back fully at the time of the survey conducted between Oct. 3 to Nov. 6.

Holmes said the data highlighted the success of the CEBA program and showed that businesses were “reliable borrowers and showed grit in capitalizing on CEBA support to stay in operation.”

But the Canadian Federation of Independent Business (CFIB) disagreed with the chamber’s assessment.

“I have a lot of respect for the chamber,” CFIB’s chief executive Dan Kelly said. “But their perspective on the data is surprising. It’s short-sighted.”

He said nearly one-third of the 900,000 small businesses that took the loan still can’t pay it back three years after the pandemic, which “sounds like a crisis.” He added that businesses have depended on other loans aside from the CEBA to survive the pandemic, during which many had to shut down due to nationwide restrictions.

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Kelly said about half of those that can repay the CEBA loan are doing so by taking another loan.

“They will borrow from their bank, but they are having to forego other expenses, like improving wages or investing in another piece of machinery or equipment,” he said. “They are starving the business of oxygen to service the debt.”

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Kelly said CEBA helped businesses when they were in need, but that it’s now like a “noose around the neck for hundreds of thousands of businesses” that are panicking.

“Businesses do fail during both good times and bad times, but what worries me is that we have a bunch of businesses failing as a result of two years of off-and-on due to the pandemic,” he said. “I would say that unless there were 90 per cent who would be able to repay the loan, it would be worrisome.”

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