Businesses and organizations that obtained government loans through the Canada Business Emergency Account (CEBA) program during the COVID-19 shutdowns are trying to repay them on time to avoid further financial hardship.
However, rising inflation and the lingering effects of the pandemic are making it difficult.
While some companies expect to meet the deadline, others plan to take on more debt to get there.
“We most likely would have had to close the doors if we hadn’t gotten this loan,” said Marc Pelletier, president of Winnipeg’s South Osborne Legion.
A $60,000 interest-free loan through CEBA helped the branch stay afloat.
As in-person activities resume but remain below pre-pandemic levels, the organization is focused on loan repayment.
“We’re on track to be able to repay that by the end of 2023,” Pelletier said.
A key deadline, because if it is respected, the government will cancel up to $20,000 of each loan.
But that’s easier said than done, according to Loren Remillard, president and CEO of the Winnipeg Chamber of Commerce.
“For many businesses, especially those in the hardest hit sectors – hospitality, restaurants, arts and culture – this is a stress they really have to deal with,” Rémillard said.
He said some businesses may not be able to repay loans, in part due to inflationary pressures, labor shortages and the continued effects of the pandemic.
“So much so that some are exploring financing to pay off the loan so they can get the forgivable $20,000 part of it,” Rémillard said.
The program, credited with providing assistance at a time of great need, was administered by Export Development Canada (EDC) – a Crown corporation – and accepted applications between April 2020 and June 2021.
A total of 898,000 small businesses have been supported by the program which has raised $49 billion across the country.
In an emailed statement, EDC said it “will not speculate on the number of refunds or when they will be received.”
“In the event that an eligible borrower is unable to repay the non-reimbursable portion of their loan by December 31, 2023, an interest rate of 5% per annum on the outstanding balance from January 1, 2024 will be charged, and must repay their loan in full by December 31, 2025.”
Pressure groups want change.
“We suggested that 50% of the loan be repayable and now give companies an extra year to repay it, so until the end of 2024 rather than the end of 2023,” said Dan Kelly, president and chief executive. of Canadian Federation of Independent Business.
To repay the borrowed money, the South Osborne Legion had to delay other projects, including upgrades to accept debit and credit card payments.
“And now with the loan repayment and we’re not quite where we want to be, it keeps getting postponed,” Pelletier said.
Remillard said the House is pleased the government has revised the repayment deadline from the end of this year to December 31, 2023.
He hopes the government will return $20,000 of each repayable loan, whether paid on time or not.
The Canada Revenue Agency will work with EDC to collect overdue loans.