The deadline for Canadian businesses to repay pandemic loans and receive partial forgiveness is Jan. 18. A move that business groups say will lead to closure for thousands of struggling companies. Dan Kelly, the president of the Canadian Federation of Independent Business, stated, “I believe the government will regret the decision to not grant more time as small businesses fail and default on their entire loan.” During the COVID-19 pandemic, almost 900,000 businesses and non-profits obtained a Canada Emergency Business Account loan of up to $60,000 in interest-free loans to aid in their survival.
Up to one-third of the loans could be forgiven if the outstanding amount is repaid by Jan. 18, otherwise, the debt will be converted into a three-year loan with five percent annual interest. Prime Minister Justin Trudeau explained that the government extended the deadline twice due to the ongoing challenges faced by businesses in the wake of the pandemic but said, “But we are now far enough from the pandemic that we do have to wrap up pandemic programs.”
The CFIB and Restaurants Canada have both called for the deadline to be extended again, emphasizing that for many businesses, the CEBA loan will be the last straw. More than half of restaurants are currently operating at a loss or barely breaking even, compared with just 10 percent pre-pandemic. The food service sector has been disproportionately affected by pandemic lockdowns and is vulnerable due to its traditionally low profit margins. The recovery from the pandemic has been slow due to inflation, food prices, and labor shortages.
Businesses that are facing challenges with their CEBA loans and can’t repay by Jan. 18 have the option to refinance their loans with a financial institution, which would give them until March 28 to set up the arrangement and still be eligible for partial forgiveness. The CFIB has expressed concerns that many bank staff don’t understand the process around this extension and has urged businesses to send a written request for refinancing to their original CEBA bank.
If businesses cannot repay by Jan. 18, they are being advised to engage with their financial institutions, or they still have three years to repay the entire body of the loan.