The government needs to re-evaluate the repayment terms of the CEBA program

​Loans and grants were a lifeline for businesses three years ago when the pandemic hit. Now, the path to repayment is proving challenging.
 
Many businesses borrowed from anywhere they could — banks, credit unions, the government, family, and personal finances — as rain day funds weren’t deep enough to deal with years of public health restrictions.
 
One program in particular offered tangible help early on in the pandemic — the Canada Emergency Business Account (CEBA), which offered a total of $60,000 in interest-free loans for small businesses and not-for-profits with up to $20,000 eligible for loan forgiveness.
 
In 2021, the Peterborough and the Kawarthas Chamber of Commerce had its policy resolution “CEBA Loan Forgiveness For Hardest Hit Businesses” endorsed by chambers and boards of trade from across Canada. We pushed for at least a two-year deadline extension, keeping the forgivable portion available to all business that continue to have operations impacted by ongoing COVID-19 public health restrictions, and allowing businesses that continue to have operations impacted to be exempt from incurring interest prior to the balance of their loan being due. Otherwise, those businesses hit the hardest would get the least out of the program (interest on their loans and no forgivable portion) while putting the government in the awkward position of having to collect from the very businesses it pledged to support with this measure.
 
In January 2022, the federal government extended the deadline by one year. That means businesses will be expected to pay back two thirds of their loan by December 31, 2023 or they will become ineligible to get a portion of their loan forgiven and begin to accrue interest at 5% before coming due December 31, 2025.
 
A recent CBC article titled “Only a fraction of CEBA loans have been repaid as businesses call for deadline extension” claims only 13% of the 900,000 businesses have repaid their loan in full. In total, $5.7 billion has been repaid of the more than $49 billion in loans issued.
 
A lot has changed since those initial loans were issued in 2020. The optimists among us figured we would be through the worst of the pandemic and its public health restrictions in a matter of weeks or months. Three years later and we finally seem to be through the worst of it but have been hit with continued supply chain and labour bottlenecks and challenges, the highest inflation in a generation, soaring interest rates, and the looming threat of a recession.
 
Given all that has unfolded, our 2021 policy resolution may not have gone far enough.
 
We do need to encourage those who have come through the last three years in decent financial shape to pay back their loans. There are more than $43 billion in outstanding CEBA loans out there and it’s to the benefit of all taxpayers that those who are able to repay it do so. And this program is just one part of the massive, multi-government spending program that helped people, businesses, and non-profits make it through an unprecedented global crisis. Our governments have accrued massive amounts of debt and we need to do what we can to pay back what is owed.
 
But we need to set criteria to support those hit the hardest. The result of the current design of the program is that the most vulnerable businesses will also get the least benefit from it, resulting in significant interest incurred and the requirement to pay back 100% of the principal — dragging out their recovery even longer.
 
This government has acknowledged the disproportionate impact on social demographics including women, ethnic and racial minorities, and First Nations. A larger number of people in these demographics depend on the hardest hit businesses for employment and those who own businesses tend to have less financial backing to weather a financial crisis like COVID-19.  The hardest hit business sectors include food service, hospitality, tourism, arts and entertainment, retail, and personal service. Many faced the most significant public health restrictions, were least likely to have access to capital, and continue to bear the brunt of our workforce shortage.
 
Adding to this struggle is the mental health crisis many business owners are facing. Prolonged social restrictions, struggles to repay debt, and a less optimistic recovery are weighing heavily on many people who have invested significant time and money into their business.
 
The federal government needs to re-evaluate the repayment terms of the CEBA program. Businesses hardest hit over the last three years require a longer interest-free loan period and a larger debt forgiveness program.