The Canada Emergency Business Account (CEBA) has been a real lifeline for many SMEs during the pandemic. Many of them would not have survived without this loan which, however, prevents them today from keeping their heads above water.
The pandemic has been marked by uncertainty, lockdowns and restrictions. Many businesses were unable to operate normally. A restaurant could be allowed to open with limited seating one week, then be forced to serve only take-out orders the following week.
A gym that had just offered a spinning class might have to cancel it the following week. It is in this context that the CEBA was created, which allowed businesses and non-profit organizations to obtain up to $60,000 in interest-free loans to help them adapt to the constraints imposed during the pandemic. and keep their doors open. Nationally, nearly 900,000 small business owners have been approved for loans under CEBA.
The most attractive aspect of the CEBA loan is the grant portion, which allows borrowers to convert up to 33% of the loan ($20,000 maximum) into a grant if they repay their loan by December 31, 2023. But the deadline is fast approaching and many small business owners won’t be able to pay it back on time.
One more year, maybe two
In March 2023, data from the Canadian Federation of Independent Business (CFIB) showed that only 10% of SMEs had fully repaid their CEBA loan while 43% of recipients are at risk of not being able to repay it before the end of 2023 It’s no surprise, then, that nearly three-quarters (72%) of small business owners want the repayment deadline extended by at least a year, if not two years.
Entrepreneurs believed they could turn the page at the end of the pandemic, but this is far from the case.
In addition to the fact that about half of them still have below-average incomes, they have to deal with supply chain disruptions, labor shortages, tax increases and labor rates. interest as well as inflation. All of these factors increase their operating costs. Their incomes are low, their profits even lower.
Despite these difficult conditions, SMEs must pay their employees, payroll taxes, suppliers, overheads and make remittances to governments for sales taxes. The prospect of having to repay their CEBA loan, on top of all other obligations in a difficult economic climate, is daunting and demoralizing. Many small business owners see it as a source of personal stress and financial anxiety.
These reasons, in addition to other pressures, mean that nearly 20% of businesses in the country, or almost 250,000 of them, could have to close their doors in the coming year.
The federal government has given a helping hand to SMEs, which have met incredible challenges during the pandemic. But the game is not over. They now need more time to repay their CEBA loan and thus benefit from its subsidy portion. Extending the repayment deadline is vital to enable SMEs to get by.