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Hundreds of thousands of small businesses throughout Canada are relying on the federal government to provide an extension of the deadline to repay their Canada Emergency Business Account loans, popularly known as CEBA. Since COVID-19 Public Health restrictions began in 2020, it has been clear that economic recovery would be a long and non-linear process. While some sectors are now thriving in the post-pandemic economy, the recovery remains uneven amongst sectors and regions.  

CEBA was a lifeline for many businesses without other options during the pandemic. The CEBA program offered interest-free loans of up to $60,000 to small businesses and not-for-profits. For eligible CEBA borrowers in good standing, repaying the balance of the loan on or before December 31, 2023 will result in loan forgiveness of up to 33 percent (up to $20,000). Recognizing that some businesses have been slow to recover, the federal government has already extended the loan forgiveness deadline once. For many, conditions have improved little and they require further extension. 

Almost 900,000 CEBA loans were approved across Canada. Many businesses had no choice but to take on this debt due to circumstances beyond their control. This includes businesses in some of the hardest hit industries such as retail, tourism, restaurants, bars, salons and more. Mandatory business closures and other government health restrictions left businesses with severe income losses and cash flow issues. 

The federal government deserves praise for providing this relief (amongst others) at the height of the pandemic to those small businesses that needed it most. However, this also means that these businesses were those most vulnerable to such a cataclysmic economic downturn and a significant number of them remain in a precarious financial position and have been counting on getting the benefit of the forgivable portion. 

Businesses that are unable to repay their CEBA loan by the deadline will lose access to the forgivable portion of up to $20,000, further increasing their debt load. Extending the repayment timeline for the CEBA loan without losing access to the forgivable portion would give many small-and-medium size businesses the stability and certainty they need to get back on their feet on a path to prosperity. 

Most small businesses have very tight profit margins that are sensitive to any disruption of business. To underscore this reality, Export Development Canada reported that by the end of November 2022, only 13% of CEBA loans had been repaid. 

Businesses, associations and others have been calling for the federal government to provide a further extension of the repayment and partial loan forgiveness deadline that is looming at the end of 2023. We were disappointed this was not part of Budget 2023 released in March, but the government must come through with this relief in the fall economic statement. 

Many small businesses are hampered from repaying their CEBA loans not only because of a slower-than-expected recovery for their operation, but also because of the large amount of debt incurred from other sources. According to a January 2023 Statistics Canada report, more than 20% of all businesses were carrying a greater debt load than at the beginning of the pandemic and they addressed the disparity amongst sectors and size of business: 

More businesses in accommodation and food services reported a greater current debt level than businesses in other sectors, at over one-third (36.6%), followed by businesses in arts, entertainment and recreation (29.7%) and administrative and support, waste management and remediation services (29.5%). 

Additionally, smaller businesses generally were more likely to report a greater current debt level: 

One-quarter (25.7%) of businesses with 5 to 19 employees, and over one-fifth of businesses with 1 to 4 employees (20.8%) and 20 to 99 employees (21.8%) reported that their current debt level was greater than it was prior to the start of the pandemic, in contrast with 12.2% of businesses with 100 or more employees who reported the same.” 

Despite their best efforts, high interest rates, inflation and increased labour costs are making it difficult for small-and-medium size businesses to keep their heads above water, let alone make any dent in the debt many had to take on to survive pandemic restrictions. A recent analysis of over 15,000 Canadian businesses by the Canadian Chamber SME Institute found that inflation, input costs, and interest/debt costs are the three most acute obstacles faced by business (at 56%, 40% and 38%, respectively), and the smaller the firm, the more constrained they are by debt. 

Our members have told us that the looming repayment deadline is untenable and so we engaged the Atlantic and Canadian Chambers of Commerce on the issue, resulting in the national chamber preparing a joint letter, which will be sent to Finance Minister Freeland early next week, signed by chambers from coast-to-coast-to-coast. However, we also need individual businesses and non-profit loan holders to make their voice heard as well – contact your local MP – they are your advocate within the federal government. In Fredericton, MP Atwin is pushing her government for this relief, and she needs your help – just reach out and make your voice heard. 

It is clear that many small businesses are still trying to recover from the pandemic, related public health restrictions and now inflation and labour costs that we haven’t seen in a generation or more. While in many ways we’ve moved on from COVID-19, these remain extraordinary economic times and the federal government must act in extraordinary ways to stabilize our small business sector and ensure the path to prosperity is not weighed down by unnecessary debt. 

Krista Ross is CEO of the Fredericton Chamber of Commerce, a nationally accredited organization with more than 1,000 members, is an active business organization engaged in policy development and advocacy that affects the competitiveness of our members and the Canadian business environment. The Chamber’s vision is ‘Stronger Community Through Business Prosperity’. 

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