(Ottawa) Businesses are worried about being able to repay loans taken out during the pandemic, especially from the federal government.
Fortunately, two weeks ago they received a small gift from Finance Minister Chrystia Freeland. The deadline for being able to take advantage of the favorable repayment conditions has been extended.
And today, companies are asking new questions. How long will they have to repay? What are the rules?
“And we don’t yet know the answers,” says Canadian Federation of Independent Business (CFIB) president Dan Kelly. It is very clear to me that this is a last minute addition to the fall economic statement since we have no details. ”
Since its inception, the Canadian Business Emergency Account (CUEC) has provided loans totaling $ 49.17 billion to nearly 900,000 businesses. A majority of them are in Ontario, almost 41%. The government advances money very quickly to allow some businesses to pay bills like their rent, electricity or their employees’ salaries.
When the program was launched at the start of the pandemic, companies had until December 31, 2022 to repay these zero-interest loans and benefit from a write-off of part of the debt.
According to Kelly, that deadline was reasonable, when the lockdown put in place to slow the spread of COVID-19 was only to last a few weeks or months.
The restrictions continue to affect businesses, many of which are no longer making a profit. And when the light seemed to be reaching the end of the tunnel, here is the Omicron variant that questions everything.
“We urge the government to redouble its efforts and increase its assistance to small and medium-sized businesses,” said Kelly. Depending on the future, we may need a larger loan from CUEC to help businesses get by. ”
CFIB called on the federal government to extend the repayment deadline to December 31, 2024 to help more businesses. This recommendation was based on a survey of its members which indicated that they did not anticipate a return to profits for another two years.
Mr Kelly believes that half of small businesses will be in a position to start repaying their loans in the year 2022. The other half are expected to wait longer, especially in the retail, restaurant, tourism and services.
“You need to see the details to know when companies will have to start repaying,” he says.
A good year
Data indicates that the Canadian economy has performed well in 2021.
The job market had recovered at the end of the summer from the job losses attributable to the pandemic. The unemployment rate was 0.3 percentage point from its pre-pandemic low in February 2020.
The growth has been so significant that Statistics Canada estimated that economic activity in October was only 0.5% below pre-pandemic levels.
But a few clouds are on the horizon.
According to a Statistics Canada study, 15.1% of businesses anticipate “major challenges” in repaying funds received under government repayable support programs over the next 12 months.
The Canadian Business Situation Survey indicates that this concerned nearly two-fifths of businesses in the accommodation and food services sector and about a quarter of businesses in the arts, entertainment and recreation, and transportation and entertainment sectors. storage. These are sectors that have not yet benefited from a full recovery in their activities.
The government will not force businesses that default on their payments, regardless of their financial situation. They will not be able to see part of the loan written off and the interest rate will be set at 5%.