New Democrats and a business group are calling on the federal government to extend the time for small businesses to repay loans they received under a pandemic support package.
But an economist cautions against this approach, saying taxpayers should not subsidize businesses that are still struggling to repay loans more than three years after the pandemic.
The Canada Business Emergency Account (CEBA) program has provided approximately 900,000 small businesses and nonprofits with up to $60,000 in interest-free loans during the pandemic.
The repayment deadline for these loans was extended last year until December 31, 2023 to ease pressure on businesses still recovering from the pandemic.
But now the New Democratic Party (NDP) and the Canadian Federation of Independent Business (CFIB) are again calling for that deadline to be extended, with the federation saying nearly 20% of businesses risk closing if deadlines are not met. postponed.
“While the NDP was pleased to see the government heed calls to extend the initial refund deadline, a second extension giving Canadian small businesses more time to get back on their feet is needed,” the NDP spokesperson wrote in a statement. small business issue, Richard Cannings, to Finance Minister Chrystia Freeland on Monday. There is a real risk that many will not be able to stay afloat, and a substantial part of this debt will never be repaid. »
Businesses that repay their loans by the end of the year may see up to a third of their loans forgiven. Those who did not would have their debts converted into a two-year loan with interest at five percent per annum.
Miles Corak, an economics professor at the City University of New York, said the call for a new extension should give policymakers pause to spur productivity growth.
“If after three years these companies are unable to repay the loans they have taken out voluntarily under a set of clear rules […]they are clearly unable to meet the rigorous demands of a competitive market,” he argued.