"This should sound the alarm": 200,000 Canadian businesses took on new debt to repay CEBA loan
A troubling new survey from the Canadian Federation of Independent Business (CFIB) reveals that over 200,000 Canadian small businesses had to take on new debt to repay their CEBA loan.
The Canadian Emergency Business Account (CEBA) is a government-funded, interest-free business loan introduced in April 2020 and created to help businesses pay for expenses during the pandemic. However, according to the CFIB, an association of small and medium-sized businesses, 23% of businesses acquired additional debt so they could refinance their CEBA loans and “retain access to the forgivable portion.” The survey was based on a sample of 4,092 CFIB members.
Loan holders who repay the outstanding balance of the loan on or before the January 18, 2024, deadline will receive a 25% loan forgiveness (up to $10,000), according to the CEBA website.
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Another 50,000 small companies are applying for a special extension deadline of March 28.
As of March 26, over 26,000 people have signed a petition calling to extend the CEBA loan repayment deadline to December 31, 2025.
The petition was started by Malik Yasir Awan, who said that businesses are still “grappling with the lingering effects of the pandemic.”
“By granting an extension, businesses will have the necessary time to rebuild and regain financial stability, ensuring long-term survival,” he said.
As businesses take on additional debt to meet the deadline, CFIB President Dan Kelly warns that these businesses face high-interest rates that will make it even harder for them to “meet their payment obligation.”
“We need to remember that while the government got a lot of CEBA balances repaid, the debt for many businesses didn’t suddenly go away — it just shifted from a low-interest government-backed loan to a higher-interest bank loan,” he said. “This should sound the alarm for policymakers, particularly given the business insolvencies are surging.”
In January 2024, business insolvencies jumped by 129.3% compared to January 2023. In addition, one in five small business owners said they’re worried about their business’s financial situation.
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Now, CFIB is asking the government to introduce a three-year repayment plan for “ineligible” loan holders. They’re also asking for more flexibility to use the March 28 extension and to “look at new ways to lighten the debt load” for businesses unable to meet the January 18 deadline.
Corinne Pohlmann, executive vice president of advocacy at CFIB, said that between rising costs and debt, many small business owners “feel abandoned by the government” and the way it handled the CEBA repayments program.
“Ottawa should do more to help them deal with the high cost of doing business and provide concrete financial relief measures in the upcoming federal budget, such as lowering the Employment Insurance premiums for small employers and returning the $2.5 billion in carbon tax revenue owed to small businesses,” she said.
With files from Isabelle Docto
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