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The clock is ticking. Loudly.
And as of right now, there are just 10 days left.
During the height of the COVID-19 shutdowns, the federal government launched a program that let businesses borrow emergency funds to help cover their costs. The Canadian Emergency Business Account let companies apply for support to keep their businesses going.
THE CANADIAN PRESS/Adrian Wyld/File Finance Minister Chrystia Freeland
Across the country, 900,000 organizations applied for and got the loans of up to $60,000. A feature of the program was that, if the CEBA loans were paid off by a set deadline, business owners could see up to one-third of their loan, as much as $20,000, forgiven.
To obtain that forgiveness, business owners can either pay off the loan with cash, or make plans to refinance their debt before the Jan. 18 deadline.
Until now, the loans have been interest-free. Once the 18th comes, if businesses haven’t made refinancing and repayment decisions, their interest rate climbs to five per cent. The businesses that stay in the CEBA program also have to have their loans fully repaid by 2026.
Roughly one-fifth of the successful borrowers had paid off their loans by last August, but for many others, the deadline looms large.
Some businesses are finding they simply don’t qualify for refinancing, and that means new interest burdens cutting sharply into their bottom lines. Others are trying to find ways to absorb interest payments on their refinanced debt, even though they may be able to get partial loan forgiveness.
All of this comes at a rough time for small businesses: it’s January.
While businesses are coming off what are usually their most successful weeks of the year — the weeks leading up to the Christmas season — they’re now caught in the post-Christmas doldrums, a period of time that traditionally is, financially, their worst time of the year.
Customers are keeping their debit and credit cards in their wallets, paying off holiday debt, and even the weather makes it more difficult to entice them to spend. And retailers are dealing with products that didn’t sell the way they’d hoped, and inventory that has to be paid for.
There’s heat, light, rent, labour and other expenses to be paid, even though there is less money coming in the door. Christmas also may not have been a financial panacea for many business: with inflation and high interest rates, many shoppers may have opted for fewer Christmas purchases this year. Money’s tight.
There have been warnings for months that there could be a CEBA-related shakeout as the deadline arrives, simply because, even after the worst of the pandemic shutdowns were behind us, many businesses have next to no financial reserves.
Yes, business owners should have seen it coming. And yes, they knew very well it was coming.
But that doesn’t mean that they had the ways and means to deal with any of it.
Federal Finance Minister Chrystia Freeland has said in the past that the 2026 deadline gives borrowers plenty of time to pay off their loans, and that the five per cent interest rate is a reasonable one.
At the same time, when a government is trailing in the polls as badly as the Liberals are, the last thing they need is a chorus of small business owners saying the terms of a federal program put them out of business, and took jobs from their employees.
The federal government didn’t design the program to make repayment the straw that broke the camel’s back.
But, at this late stage, with nothing to suggest the deadline will be moved, a good number of broken-backed business camels seem to be in our future.
In 10 days, we’ll begin to see how many.
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