CEBA extension has done nothing to relieve pressure on small business owners

Canada's small business owners need longer to avoid extra debt burden

CEBA extension has done nothing to relieve pressure on small business owners
Steve Randall

When the federal government appeared open to easing the debt burden on Canada’s small business owners, many were expecting the CEBA loan deadline would be extended by a year.

However, the 18 days that Ottawa announced was unhelpful according to 80% of respondents to a Canadian Federation of Independent Business survey.

For those businesses that received the emergency funding that CEBA offered during the pandemic, the 33% (up to $20,000) forgivable portion of the loan was an important part of how they would be able to pay it back.

By meeting the deadline to pay back the rest of the loan, businesses would be entitled to the forgivable amount, which varies depending on the size of loan. But to qualify, businesses must make that significant repayment by the deadline.

"The government gave small business owners false hope by announcing a one-year extension. But the extra year is only for those who miss out on the $20,000 forgivable portion, which small businesses are desperate to retain,” said CFIB president Dan Kelly. “The deadline to repay the loan while securing the forgivable portion was only moved by 18 days, from December 31, 2023, to January 18, 2024. This announcement completely missed the most immediate priority of Canada's small business community."

Most will struggle

Only 34% of respondents to CFIB’s poll can manage to meet the January repayment deadline, given the challenging economic conditions that have been in play over the past 18 months, in addition to businesses struggling to recover from the pandemic.

For another 30%, to avoid losing the forgivable portion of their CEBA loan, they are considering additional borrowing to make the required level of repayment. Refinancing extends the deadline until March 2024.

Among businesses planning to borrow funds to cover their CEBA debt, more than half (61%) will pursue financial institution refinancing, and one in five (19%) will use home equity.  

A further 30% have no means of securing additional financing and will face interest on the entire amount of their CEBA loan for a 2-year term.

CFIB and thousands of businesses are calling on the government to extend the deadline for the forgivable portion to the end of 2024.

"Ottawa's announcement left small business owners scrambling, trying to decide between losing the forgivable portion or taking another loan at a much higher interest rate in order to secure the forgivable portion," said Corinne Pohlmann, Executive Vice-President at CFIB. "Ottawa still has the ability to fix the problem. It just has to do it – and do it quickly."