As the deadline to repay pandemic-related loans and receive partial forgiveness approaches, small businesses are still hoping the federal government will reverse course and extend the measure for another year.
Nearly 900,000 organizations applied for and received a Canada Emergency Business Account (CEBA) loan during the COVID-19 pandemic. The federal program offered up to $60,000 in interest-free loans to help businesses and nonprofits survive shutdowns and resulting slowdowns.
In total, $49.2 billion was disbursed under this program.
Up to a third of loans can be forgiven if businesses repay the outstanding amount by January 18, 2024. Those who miss this deadline will lose the repayable portion and see their debts converted into a three-year loan with interest of 5 % per year.
Businesses were offered the opportunity to refinance their loans with a financial institution. Those who did so were given until March 28, 2024 to get their affairs in order and still be eligible for the repayable portion of the loan.
Business groups are calling for more time to repay loans, highlighting the ongoing challenges facing small businesses post-pandemic.
But with just over two months to go before the deadline, the chances of a new extension are diminishing.
“Federal support has been instrumental during the COVID-19 pandemic, but many businesses are still grappling with rising costs, labor shortages and ongoing operational issues,” Kate Fenske said Monday, President of the International Association of Downtown Canada, during a press conference.
“This is why we are immediately requesting a further extension of CEBA loan repayments,” she said.
Flexibility
The federal government has already made several changes to the CEBA program to provide more flexibility to businesses recovering from the pandemic.
Last year, it extended the loan repayment deadline for another year, until December 31, 2023.
Then, in September, Prime Minister Justin Trudeau announced that the deadline to qualify for CEBA loan forgiveness would be extended by a few more weeks to ease pressure during the holiday season.
The government also extended the loan repayment deadline by an additional year, without forgiveness, until the end of 2026.
The federal government granted these extensions despite warnings from Export Development Canada of the administrative burden this entails.
The Canadian Press obtained a letter through a freedom of information request that shows Mairead Lavery, CEO and president of the federal agency, warned senior officials of these challenges earlier this year.
“The CUEC is a unique offer, structured as a repayable loan program. As such, creating and implementing discount extensions is a complex process,” M wroteme Lavery on March 29 to Michael Sabia, then deputy minister of Finance, and Rob Stewart, deputy minister of international trade.
A spokesperson for Finance Minister Chrystia Freeland stressed that the federal government had shown flexibility.
“The bottom line is that if you are a small business and do not currently have the funds to repay your CEBA loan, you now have three years to repay it in full,” wrote his publicist, Katherine Cuplinskas, in an email.
“The additional flexibility we have announced is important support for small businesses who may still be struggling to make ends meet. »
Mme Cuplinskas said about a fifth of businesses have already repaid their loans.
The survival of SMEs at stake
The Canadian Federation of Independent Business, which represents about 100,000 businesses across the country, has been vocal on the issue of CEBA loans.
Its president, Dan Kelly, said failure to grant another extension could be disastrous for the survival of some small businesses.
“I really fear that if the government tries too hard and sticks to the current CEBA deadline, many businesses, we estimate up to 250,000 small businesses, will go bankrupt if they lose the repayable portion of this loan,” Kelly said.
Mark Zelmer, a senior fellow at the CD Howe Institute, said it’s understandable that some companies still face challenges, particularly as the Canadian economy slows.
“But now I think the environment is not so much about the pandemic itself, but about subsequent issues that have emerged that are creating challenges for everyone,” Zelmer said. Some of these are after-effects of the pandemic, but other events have occurred since. »
The opposition and the provinces in favor of an extension
Calls for an extension have garnered political support from all 13 premiers as well as the federal NDP, Bloc Québécois and Greens.
Last month, the premiers wrote a joint letter to Trudeau asking the federal government to give small businesses more time.
“We urge your government to allow more time to allow businesses to take advantage of the loan forgiveness option, in addition to extending the repayment of CEBA loans by one year. More time is needed to allow the hardest-hit small businesses to continue their recovery from not only the pandemic, but also the cost shocks that followed,” the premiers wrote.
The federal Conservatives have not taken a position on CEBA loans and requests for extensions, which Mr. Kelly called “deeply disappointing.”
Although time is running out to act, Mr. Kelly said he hoped there was still a chance the federal government would reverse course.
He highlighted the temporary three-year suspension of the carbon price for people who use home heating oil. Liberals in Atlantic Canada, where a disproportionate number of households still use home heating oil amid rising costs, were among those advocating such a move.
“I wouldn’t have thought the government would have caved in on the carbon tax on heating oil the way they did, but they did,” Mr Kelly said.
“But I believe the fall economic statement will be one of the last windows during which the government could announce further policy changes. »