Many small businesses are experiencing significant financial stress as the Jan. 18 deadline approaches to repay a large federal government loan issued during the COVID-19 pandemic.
As of 1er January, half of the 900,000 small businesses that benefited from the Canadian Emergency Business Account (CEBA) had still not remitted their share of the $49.2 billion paid through the program.
Based on a survey of its members, the Canadian Federation of Independent Business (CFIB) estimates that 22% of them will not be able to pay it on time. If they do not do so, they will lose the “subsidized” portion of this program, which is $10,000 or $20,000. An entrepreneur who received $30,000 must repay $20,000 for $10,000 to be converted into a donation, while one who received $60,000 must repay $40,000 to be forgiven $20,000.
However, this deadline comes at a very bad time. Rising input costs, rising interest rates and falling sales due to inflation are currently plaguing businesses and preventing them from getting back on track.
“The pandemic was the reason for creating this program, but the economic contraction we are currently experiencing is a reason to maintain it,” indicates Charles Millard, president of the Federation of Chambers of Commerce of Quebec (FCCQ).
Representatives of the business community are particularly concerned about the catering, tourism and retail sectors.
“These are sectors that were closed for a very long time during the pandemic and which were therefore not able to accumulate sufficient revenue,” says Jasmin Guénette, vice-president of national affairs at the CFIB.
“The financial impact due to the reimbursement of the CEBA by Quebec tourism companies will be significant,” declared by email the vice-president of public affairs and communications of the Quebec Tourism Industry Alliance, Sébastien Benedict. . In fact, 68% of them obtained a CUEC loan, 82% of whom had not yet repaid it in full as of last October. »
A postponement requested
The Alliance, the FCCQ, the Regroupement des Jeunes Chambres de Commerce du Québec and the CFIB are all calling for an extension of the CEBA reimbursement deadline, ideally by one year.
It must be said that the federal government has already made several relaxations in recent years and months. The deadline, initially scheduled for December 31, 2022, was pushed back by one year, then by two weeks. Furthermore, businesses can contact their financial institution to obtain refinancing of their loan and avoid losing the subsidized amount of $10,000 or $20,000. Upon proof of such a request, the government grants them an extension until March 28. The CFIB points out, however, that the interest rates on this refinancing can be high.
“The bottom line is, if you are a small business owner and do not currently have the funds to repay your CEBA loan, you now have three years to do so in full,” said by email. Katherine Cuplinskas, press secretary in the office of the Deputy Prime Minister and Minister of Finance of Canada. “The additional flexibility we have announced is important support for small businesses who may still be struggling to make ends meet. »
The problem with this option, however, is that entrepreneurs lose a third of this capital and are left with an interest rate of 5%.
Concern in the region
Several stakeholders fear business closures and their effects on economic vitality in the region.
Suzanne Carrière, owner of the Femme ou fille boutique in Salaberry-de-Valleyfield, managed to repay her CUEC loan by borrowing and injecting personal money.
“The problem is that it leaves a big hole in liquidity,” says the woman who is also president of the Beauharnois–Valleyfield–Haut-Saint-Laurent Chamber of Commerce and Industry.
However, Mme Carrière notes that several businesses have closed very recently or are preparing to close on its commercial artery, Victoria Street, already dotted with empty premises since the pandemic. “It’s not a good time to be in business,” she laments.
Young, growing businesses also risk suffering, fears Pierre Graff, president and director of the Regroupement des Jeunes Chambres de Commerce du Québec. “When you get to the growth phase, you have expenses that you didn’t have at the beginning, like premises and employees. You have to invest in marketing your product or service, research and development,” he explains.