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80% of small businesses did not find changes helpful, and only 34% can repay the loan on time
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Ottawa’s decision to extend the time small businesses have to repay a pandemic-era loan, but not provide them more time to get partial debt relief was a “very balanced” and “fiscally responsible” move, Canada’s new minister of small business said, even though business associations still aren’t happy.
“The decision we made was as a result of listening,” said Rechie Valdez, who took over from Mary Ng this summer. “As soon as I got sworn in, I have been travelling the country, meeting different small businesses. What they have asked for is flexibility and time, which is why we provided that extension.”
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The interest-free Canada Emergency Business Account (CEBA) loans of up to $60,000 were given to around 900,000 small businesses until June 2021 to help tackle the economic impacts of the pandemic.
Until last month, repaying the loan by Dec. 31, 2023, would have allowed businesses to receive a loan forgiveness grant of up to $20,000. Failing to do so would lead to interest of five per cent per year being charged on the loan and the full principal would be due Dec. 31, 2025.
Several business groups urged Ottawa to extend the repayment deadline along with access to the forgiveness grant by at least a year because thousands of small businesses warned they have yet to financially recover due to rising costs and are staring at bankruptcy.
The government in mid-September extended the loan repayment deadline by a year to Dec. 31, 2026. But the deadline to meet the condition for the forgiveness grant of up to $20,000 was increased by just 18 days to Jan. 18, 2024.
Loan holders who make a refinancing application with the financial institution that provided their CEBA loan by Jan. 18, 2024, could extend the repayment deadline to qualify for partial loan forgiveness to March 28, 2024. But others said this condition just encourages businesses to take one loan to pay the other.
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“The minister is right. Businesses were looking for flexibility and time. But they were looking for flexibility and time for the forgivable deadline,” said Dan Kelly, chief executive of the Canadian Federation of Independent Business, which represents about 97,000 small businesses. “No business I have spoken to was focused on the December 2025 date, but that’s the date they adjusted.”
CFIB data released on Sept. 28 said 80 per cent of small businesses did not find the federal government’s changes helpful, and only 34 per cent can repay the loan on time.
Kelly said the minister’s description of the extension as being “fiscally responsible” was “short-sighted,” and he believes the federal government has a better chance of getting its money back by being a bit more patient.
“They can find billions of dollars in a matter of weeks to fund battery plants, but yet extending time for small businesses to repay a loan seems to be an area where Ottawa is all of the sudden becoming fiscally conservative,” he said.
As of September, only 18 per cent of businesses had repaid their CEBA loan in full, according to an ongoing CFIB study. But Valdez expects that figure to increase in the coming weeks.
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“To be fair, a lot of small businesses were waiting for our announcement,” she said. “Based on several meetings I have had, even with credit unions and banks, there are a lot of businesses who are ready to go ahead and pay us back. There is a portion that I am sure will be seeking refinancing. There are different small businesses at different stages at this time.”
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The minister added she would keep an eye on how things progress over the next few months and “get feedback from folks to see how they are doing.”
But that does not necessarily mean Ottawa might provide another extension to allow businesses to get a partial debt relief.
“This announcement has been made. We have made our position and I am going to continue to speak with small businesses as I travel,” said Valdez, when asked about any further extensions from the government.
Kelly said he continues to press the government for an extension to at least the end of 2024. If that doesn’t happen, he said the CEBA loan for most businesses will grow by about 50 per cent.
• Email: nkarim@postmedia.com
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