CEBA Repayment Deadline Arrives for Small Business Owners

The landing page for the Canada Emergency Response Benefit is seen in Toronto on Aug. 10, 2020. (The Canadian Press/Giordano Ciampini)

Time has almost run out for Canadian business owners to repay pandemic loans and receive partial forgiveness.

The federal government’s Jan. 18 deadline for firms to repay Canada Emergency Business Account (CEBA) loans has arrived and Canadian Federation of Independent Business (CFIB) CEO Dan Kelly said it could push many small companies out of business.

“I believe the government will regret the decision to not grant more time as small businesses fail and default on their entire loan. For many businesses, CEBA will be the straw that breaks the camel’s back,” Mr. Kelly said in a Jan. 17 statement.

Ottawa paid out upwards of $49 billion to almost 900,000 businesses across Canada through its CEBA program to help business owners make ends meet during closures and other restrictions put in place during the COVID-19 pandemic.

The government guaranteed up to $60,000 in loans to eligible small businesses, payable through their banks. Businesses that qualified received the money interest-free and will have one-third of the loan forgiven, but only if the remaining two-thirds is paid by the Jan. 18 deadline. Businesses that qualified for the full $60,000 loan must now pay $40,000.

Businesses unable to meet the deadline will be allowed an extra two months to refinance the loan, but will lose the one-third loan forgiveness amount. The new three-year term loans come with five percent interest per annum and must be paid back in full by Dec. 31, 2026.

The original CEBA repayment cutoff was Dec. 31, 2022. The deadline has since been extended twice to give businesses a chance to scrape the necessary money together. Despite requests by agencies like the CFIB and Restaurant Canada to extend the grace period again, the government has said it is done waiting.

Prime Minister Justin Trudeau made it clear on Jan. 17 that there would be no further deadline extensions.

“Pandemic supports, we all know, had to end at some point,” he told reporters during a press conference in Saint John, N.B. “We are now far enough from the pandemic that we do have to wrap up pandemic programs.”

A spokesperson for Finance Minister Chrystia Freeland said although only one-fifth of businesses have paid off their loans thus far, the government is continuing to accommodate business owners with the new repayment option.

“The bottom line is that, if you are a small business and do not currently have the funds to repay your CEBA loan, you now have three years to repay it in full,” press secretary Katherine Cuplinskas wrote in an email. “The additional flexibility that we announced is significant support for small businesses who might still be struggling to make ends meet.”

Business Groups ‘Disappointed’

The CFIB has said it is “very disappointed” in the federal government for ignoring “the pleas of tens of thousands of small business owners to give them more time” to repay their loans so they won’t forfeit the forgivable portion.

Restaurant Canada has also said it is “disappointed” in the government’s response, saying that the food service sector was hit particularly hard by the pandemic lockdowns, forcing many to go into significant debt.

“We are not asking for a hand-out; we are asking for more time,” the agency said, noting that “the foodservice industry operates on traditionally low profit margins, rendering it further vulnerable to external pressures.”

The CFIB said the CEBA process “has been a mess right from the start” with many bank staff remaining in the dark about the refinancing process for businesses unable to meet the deadline.

“We are calling on government to give small businesses every benefit of the doubt given the lack of clarity and consistency from government and the banks,” Mr. Kelly said.

The CFIB is recommending businesses that plan to use the refinancing provision send an immediate written request to their bank.

A recent Restaurant Canada survey found that one in five restaurants with a CEBA loan said they'll likely be forced to shut down at least one location. That means up to 4,000 restaurants with association membership could be at risk of shutting their doors, said the group.

A Restaurants Canada report last October revealed more than half of Canadian restaurant owners are either operating at a loss or are barely breaking even. Thirty-four percent of restaurants were in the red as of March of last year compared to seven percent prior to the pandemic, while 17 percent are only just breaking even compared with 5 percent four years ago, the report found. Only 12 percent of restaurant owners enjoy a double-digit profit margin.

“Your favourite mom and pop restaurant and local gathering place is at risk,” said Kelly Higginson, president and CEO of Restaurants Canada, in a press release. “If what the industry is telling us comes to fruition, Canadian communities will lose something very special, simply because of an arbitrary deadline.”