Thursday will mark the deadline for Canadian businesses to repay pandemic loans and receive partial forgiveness, a move that business groupssay will spell closure for thousands of struggling companies.
“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 Canadian Federation of Independent Business, in a press release.
Almost 900,000 businesses and non-profits received a Canada Emergency Business Account loan during the COVID-19 pandemic, securing up to $60,000 in interest-free loans to help them survive.
Up to one-third of the loans could be forgiven if the outstanding amount is repaid by Thursday – otherwise, the debt will be converted into a three-year loan with five per cent annual interest.
Prime Minister Justin Trudeau said the government extended the deadline twice because of the continued challenges faced by businesses in the wake of the pandemic.
“But we are now far enough from the pandemic that we do have to wrap up pandemic programs,” he said, speaking at a news conference in Saint John, N.B., Wednesday morning.
The CFIB and Restaurants Canada have both called for the deadline to be extended again.
“For many businesses, CEBA will be the straw that breaks the camel’s back,” said Kelly.
Restaurants Canada had a similar message in a Jan. 8 press release.
More than half of restaurants are operating at a loss or barely breaking even, compared with just 10 per cent pre-pandemic, the organization said. The food service sector has been disproportionately affected by pandemic lockdowns, it said, and is vulnerable because of its traditionally low profit margins.
Meanwhile, recovery from the pandemic has been slow because of inflation, food prices and labour shortages, Restaurants Canada said.
“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.”
Businesses were also offered the option to refinance their loans with a financial institution, which would give them until March 28 to set up the arrangement and still be eligible for partial forgiveness.
But many bank staff don’t understand the process around this extension, said the CFIB. It’s urging businesses that want to use the extension to send a written request for refinancing to their original CEBA bank and keep all documentation.
“We are calling on government to give small businesses every benefit of the doubt given the lack of clarity and consistency from government and the banks,” Kelly said.
Businesses have a number of options if they’re facing challenges with their CEBA loans and can’t repay by Jan. 18, Trudeau said.
“There are plenty of financial institutions who are there to give low-cost loans … as they continue to repay it over the coming years,” he said.
“And if they don’t want to engage with their financial institutions, they still have three years to repay the entire body of the loan.”