Time is the enemy for Vancouver watchmaker Jason Gallop. He’s one of almost a million small business owners who took out a loan from the federal government during the pandemic through the Canada Emergency Business Account (CEBA) program.
The deadline to repay is fast approaching. But for recipients like Gallop the clock has already run out.
“By default, I’m in default,” Gallop told Global News. He owns the watch store Roldorf & Co. in the Gastown neighbourhood. As of December 31, 2023 he is on the hook for $40,000.
The CEBA program offered $50 billion in interest-free loans of up to $60,000 to business owners after the emergence of COVID-19. Recipients who repay most of the loan by Jan. 18 can be forgiven for up to $20,000. After the deadline, the loan will start incurring five per cent interest.
Gallop is among around 50,000 business owners the federal government said should never have received the loan in the first place.
Those who were deemed “ineligible” had to pay it back by this past New Year’s Eve, but none of their debt would be forgiven. Gallop said in his case it all came down to a “clerical error” caught too late.
“I put in one digit incorrectly for our business number,” he said.
He only found out about the issue a year after first receiving the loan, when he tried to apply for more CEBA funds and was denied.
“I was completely blindsided.”
The watchmaker faced another setback last April when a devastating fire ripped through his store.
“I was just trying to get the business restarted, trying to start up the insurance claim,” said Gallop. “It was a very chaotic time.”
Why some warn the deadline could backfire
The Canadian Federation of Independent Business (CFIB) is asking Ottawa to give all CEBA recipients (eligible or ineligible) a further one-year extension.
“It’s gotten worse for most businesses rather than better,” said CFIB president Dan Kelly.
The CFIB said only a third of the 850,000 eligible businesses that received CEBA have repaid their loans.
If they secure refinancing, businesses have until March 28 to have part of the debt forgiven. But Kelly warns that’s not enough time.
“These businesses, I believe, are going to start to tumble in the months ahead and are likely to default on the entire CEBA loan amount.”
A representative from the office of Deputy Prime Minister and Finance Minister Chrystia Freeland said Ottawa has already given multiple extensions.
“The CEBA programme provided an emergency lifeline to many Canadian small businesses,” said Freeland’s press secretary Katherine Cuplinskas in a statement on Tuesday. “In 2021, the federal government established a process in which small business owners with incomplete or ineligible CEBA applications were contacted multiple times by their financial institutions.”
Restaurants say they can’t catch a break
The restaurant industry is also pleading for an extension, saying it was banking on an economic recovery that hasn’t come.
Restaurants Canada says heavy debt, stubborn inflation, a labour shortage and slower traffic, are leaving its members with few options.
“The piece that we are most concerned about is that operators are losing the forgivable portion of that loan that they had really counted on when they took out this loan, not knowing that there was going to be four years of volatility,” said Restaurants Canada president Kelly Higginson.
According to Higginson, the summer patio season and holiday period were slower than usual because of bad weather and changing consumer habits. With less disposable income, she said Canadians are eating out less.
“We really are disproportionately impacted.”
According to Restaurants Canada, more than half of its members are operating at a loss or barely breaking even.“Pre-pandemic that number was ten per cent,” she added.
“We also had the longest lockdowns in North America,” said Higginson. “We are seeing a lot of closures.”
–With files from Abigail Bimman