Two takeout shops in the food court at Brookfield Place in downtown Toronto, are shuttered on Sept 16., 2020. While small-business owners might have thought that they had reached the surface with the end of the pandemic crisis, they are still treading water in increasingly tough economic times.Fred Lum/The Globe and Mail
Jasmin Guénette is vice-president of national affairs at the Canadian Federation of Independent Business. Christina Santini is a senior policy analyst at CFIB.
The Canada Emergency Business Account (CEBA) loan was a lifeline for numerous small businesses during the pandemic. Many would have sunk without it. But it has now become a stone around their necks as they attempt to keep their heads above water.
Repaying these loans adds to the struggles of many businesses. A recent survey by the Canadian Federation of Independent Business shows that nearly a fifth of companies – close to 250,000 across Canada’s economy – may close their doors in the year to come.
The federal government needs to give more time to businesses to repay their loans. It needs to be responsive to the incredible challenges facing Canada’s small-business owners – just as it was three years ago.
Many businesses could not operate normally during the pandemic. These were uncertain times. There were imposed lockdowns and business restrictions. One week, a restaurant could be open with limited seating; the next, takeout only. One week, a gym could hold a spinning class; the next, it couldn’t.
In came CEBA, which provided interest-free loans of up to $60,000 to businesses and non-profit organizations to help them adjust and keep their doors open. Close to 900,000 in Canada took it up.
The most attractive feature of the CEBA loan was the forgivable portion. Borrowers will receive up to 33 per cent in loan forgiveness (to a maximum of $20,000), if they pay the balance by Dec. 31, 2023. This deadline is fast approaching. Many borrowers will not be able to pay off the balance in time.
CFIB research shows that only 10 per cent of small businesses have fully repaid their CEBA loan as of March, 2023. Many of those who can repay the loan by the end of the year will struggle to do so. Nearly three in four small-business owners (72 per cent) would like to see the CEBA debt deferred by at least a year, if not two.
The reality is that while small-business owners might have thought that they had reached the surface with the end of the pandemic crisis, they are still treading water. And the seas are turbulent. In addition to sales being lower than normal for about half of them, businesses are coping with supply chain challenges, labour shortages, higher taxes and interest rates, and inflation. All these factors are increasing their operating costs. Revenues are low, profits lower.
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Despite these difficult conditions, paycheques still need to be issued, payroll taxes and HST/GST remittances paid to Canada Revenue Agency, suppliers need to get what they are owed, and overhead costs need to be covered. Adding CEBA debt repayment, on top of all these other obligations in the current economic reality, is a daunting and disheartening prospect. It is within this context that the looming CEBA repayment deadline is a source of personal stress and financial anxiety for many.
One Ontario member shared with us that sales continue to lag at their business and, because of food costs, profit margins are way down. They said they will need to sell their business to pay back the CEBA loan.
Giving small businesses more time to pay back their CEBA loans without losing access to the forgivable portion will provide much-needed flexibility and relief to help them stay afloat.