The deadline for Canadian businesses to qualify for partial forgiveness of pandemic-era loans has arrived, as business groups warn struggling firms need more time to repay their debt.
Hundreds of thousands of businesses and non-profits received a Canada Emergency Business Account loan of up to $60,000 during the COVID-19 pandemic.
Up to one-third of the loans could be forgiven if the outstanding amount is repaid by today, otherwise the debt will convert into a three-year loan with five per cent annual interest.
Businesses also have the option to refinance the loan with a financial institution, giving them until March 28 to set up the arrangement and still be eligible for partial forgiveness.
The Canadian Federation of Independent Business and Restaurants Canada have been calling for another extension to the deadline.
“I believe the government will regret the decision to not grant more time as small businesses fail and default on their entire loan,” said Dan Kelly, president of the CFIB, in a press release Wednesday.
“For many businesses, CEBA will be the straw that breaks the camel’s back.”
On Wednesday, Prime Minister Justin Trudeau said the government extended the deadline twice because of the challenges faced by businesses in the wake of COVID-19.
But now, “we do have to wrap up pandemic programs,” he said, speaking at a news conference in Saint John, N.B.
As of Jan. 15, it’s estimated that nearly 70 per cent of CEBA recipients have been able to qualify for partial forgiveness, said Katherine Cuplinskas, a spokeswoman for the office of the minister of finance.
Restaurants Canada has said that more than half of restaurants are operating at a loss or barely breaking even, as the sector was disproportionately affected by pandemic lockdowns.
Recovery from the pandemic has been hampered by inflation, food prices and labour shortages, the organization said in a Jan. 8 release.
“This decision leaves our members, representing thousands of restaurants across the country, with limited options to avoid bankruptcy and recover from the ongoing financial challenges that arose during the pandemic.”
In a fall report on small business debt and CEBA, the CFIB said seven in 10 CEBA borrowers surveyed had not started repaying the loan yet.
Many businesses have been unsure they’ll be able to repay the three-year loan, according to BDO Debt Solutions, let alone meet the Jan. 18 deadline to qualify for partial forgiveness.
Those firms should reach out to the financial institution that issued the loan and ask about payment plans, the firm said in a Sept. 28 post on its website providing information for organizations concerned about repaying CEBA.