Business picks up amid worries about repaying COVID-19 debt


The powerful group of 40 workers at the Canadian Federation of Independent Businesses that received calls from members of the association had heard a lot about the loans.

Federal loans, namely.

As the clock ticks to 2022, so does the deadline for those businesses to repay their federal pandemic loans under favorable financial terms. And with it, worries from small businesses grow about how to repay emergency loans.

Then, two weeks before Christmas, a small gift: Finance Minister Chrystia Freeland said, as part of her budget and economic update, the deadline will be extended.

Now, the calls to the CFIB team have changed: How long do I have to repay and what are the rules?

“And we don’t have an answer to that yet,” said CFIB President Dan Kelly.

“I am very clear that this is an absolute last-minute addition to the fall economic update due to the lack of details.”

Since its launch, the Canada Emergency Business Account has provided loans worth C$48.4 billion to nearly 886,000 companies, the largest portion of which, at nearly 41%, is in Ontario.

The government makes this money available quickly so that companies can use it for a variety of expenses, such as rent, rent and salaries.

When the government first created the CEBA program during the pandemic, it set a repayment deadline of December 31, 2022, for anyone looking to take advantage of the zero interest rate and partial loan forgiveness.

Kelly said the deadline makes sense when it looks like the country will begin a shutdown to slow the spread of COVID-19 and will come in weeks or months.

But he said public health restrictions affecting businesses and nonprofits have lasted as long as the pandemic, affecting their bottom lines. While restrictions have been eased, the Omicron variant has created new uncertainty about what may be coming.

“In fact, we’re urging the government to double down and increase their support for small and medium-sized businesses,” Kelly said. “Depending on where things go, we may need an even larger CEBA loan to get businesses through.”

The CFIB has been pushing the federal government to delay repayments to December 2024 to help more recipients take advantage of interest-free and forgiveness options.

The recommendation is based on a survey of CFIB members that found it could take them two more years to become profitable again.

Kelly said he thinks about half of small businesses could start repaying their CEBA loans during 2022. The other half could take longer for companies in the retail, customer, and retail sectors. hotels, tourism and services.

“We need details on when these loans are due so businesses can start planning,” said Kelly.

However, the top data on the Canadian economy entering the new year was largely positive.

The labor market at the end of summer made up for all the damage caused by the pandemic outbreak last year, and the unemployment rate for November was within 0.3 percentage points of pre-pandemic levels recorded. Received in February 2020.

The economy has also grown to the point where Statistics Canada estimates that total economic activity is 0.5 percent below pre-pandemic levels in October. The November reading comes a day before Christmas Eve.

But below are some doubts.

A report by Statistics Canada last month found that 15.1% of businesses expected to face a “major challenge” in repaying government aid over the next 12 months.

The quarterly business conditions report shows that most debt-worried businesses are in heavily exposed service industries such as accommodation, food services, arts and entertainment that have yet to fully recover. after last year’s recession.

Missing a repayment deadline does not mean that the government will force a company to repay its capital, regardless of its financial situation. Instead, the recipient will lose the ability to have part of the loan forgiven and begin facing an annual interest rate of 5%.

CEBA loans aren’t the only debt small businesses are taking on. Kelly said surveys of his members show they have added $170,000 in debt on average due to the pandemic.

Part of that is unpaid rent, or unpaid bills to suppliers. Some of it is on credit cards that expose owners to higher interest rates.

Combined, that’s why Kelly says he’s keeping an eye on what happens throughout 2022. Kelly said some business owners can see their books and simply turn in the keys if they do. see no path back to profit.

This report by the Canadian Press was first published on December 19, 2021.

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