According to the Canadian Federation of Independent Business, one-fifth of all businesses in Canada—nearly 250,000 small businesses—could be at risk of closing their doors next year unless the federal government changes the deadline for repayment of the Canada Emergency Business Account.
Currently the deadline is December 31. If the CEBA loan is not repaid by then, small business owners will lose the up to $20,000 forgivable portion and pay the entire amount at a five per cent interest rate.
CFIB is pushing the federal government to extend the repayment deadline for the CEBA loan to the end of December 2025 or at least 2024.
“Almost 900,000 CEBA loans were approved across Canada. Many businesses had no choice but to take on this loan due to circumstances beyond their control. This includes businesses in some of the hardest hit industries such as the retail industry and tourism sector. Mandatory business closures and other government health restrictions left businesses with severe income losses and cash flow issues,” says a recent letter sent by more than 250 business associations to Deputy Prime Minister and Finance Minister Chrystia Freeland.
“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 found that inflation, input costs, and interest/debt costs are the three most acute obstacles faced by business (at 56 per cent, 40 per cent and 38 per cent, respectively), and the smaller the firm, the more constrained they are by debt.”
The letter says 49 per cent of small businesses are still making below normal revenues; 50 per cent of Canadian foodservice operators are currently operating at a loss or breaking even compared to 12 per cent pre-pandemic; and, 45 per cent of Canada’s tourism businesses are likely or somewhat likely to close within the next three years without government intervention into their mounting debt load.
Many small business owners are also now discovering that in the fine print of the loan many of them unknowingly provided a personal guarantee on the loan, meaning even if the business closes its doors the owner is responsible personally for the debt.
That’s raising fears that this could lead not only to more business closures in the country but also to more personal bankruptcies.
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