Grant Harasyn says his Vancouver art department building props for the film and TV industry was hit hard, twice — first by COVID, and then, once things were back and up and running, by the Hollywood writer and actor strikes.
“One day we had, like, 30 television shows that we are supplying, and the next day we had zero,” he tells Global News.
Harasyn says he did everything he could to keep the lights on, at first by retooling to make face shields and other protective COVID gear for sets. He says he doesn’t know if his business would have been able to survive without the $60,000 federal government Canadian Emergency Business Account (CEBA) loan he received.
But with the business unable to rebound due to the Hollywood strikes, the Jan. 18 deadline to repay the CEBA loan snuck up quickly, and Harasyn says he saw few options.
Ottawa paid out close to $49 billion to nearly 900,000 businesses through CEBA. Eligible businesses can keep up to $20,000 of the max $60,000 loan if they repay the rest by deadline. As of Friday, outstanding loans will convert to three-year term loans, subject to interest of five per cent per annum.
Now, many businesses are trying to refinance CEBA, and essentially taking a loan on a loan in order to keep the forgivable portion. Harasyn said he tried to get an appointment to do so with his bank, but is still waiting weeks later.
He calls the process of dealing with the big banks “horrendous” and not business-friendly.
“I’m 65,” he tells Global News. “I don’t have a long future ahead of me to make payments, so banks don’t look at us favourably.”
Like many Canadians, he says he had seen the advertising campaign by Merchant Growth both online and on TV. He’d also received a number of emails from the company. Skeptical at first about a non-traditional, independent online lender, he figured he had nothing to lose.
“At the time, it seemed like the last resort,” Harasyn says.
It took just a couple of days from the time he applied online to the time the money landed in his account.
“Actually, it blew our minds,” he said.
Merchant Growth founder David Gens told Global News says the company focuses on small businesses, which Gens defines as those worth less than $5 million, since its launch 14 years ago.
“I think it’s helpful for people to know that there’s a non-bank lending industry out there that uses technology, makes it really convenient, saves you time, and it says, ‘yes’ a lot more often,” Gens said.
For CEBA specifically, Merchant Growth secured $300 million for refinancing by partnering with Fortress Investment Group. Gens says his company spent a year building CEBA-specific technology to create a seamless online application that can be completed in one sitting from a phone or computer.
Now, in the final crunch time before deadline, Gens says they are receiving inquiries from more than 1,000 businesses every day.
“We’re not the cheapest source of capital. We never pretend to be,” Gens told Global News.
And that’s the trade-off for speed and convenience, says University of Toronto marketing professor David Soberman: higher interest rates.
“If you want convenience, which means you can do most of it online, if you want simplicity and you want speed, it’s going to cost you more,” Soberman tells Global News.
“I don’t see it as particularly bad. I see it as a choice that businesses have, and this is the sort of choice that businesses always need to make.”
Soberman says the unusual situation created by CEBA, where hundreds of thousands of businesses need to repay money at the same time, has fostered an environment for more non-traditional lenders to flourish. This comes alongside developments in technology that allow for non-banks to operate more cheaply and without the bricks and mortar constraints of the big banks.
“If you have the time and the wherewithal to go to a bank, you’re going to get a better deal and pay less on the money that you’ve borrowed than if you decide to go through an organization like Merchant Growth.”
That’s the challenge so close to the Jan. 18 deadline — banks can’t necessarily turn applications around as fast. Harasyn has been waiting weeks to hear back from his original bank, and says he’s glad to pay the higher interest rates from Merchant Growth.
Why? It all comes down to the forgivable portion of the loan — up to $20,000 of the $60,000-maximum.
A business that refinances with Merchant Growth by Jan. 18 will pay from interest rates in the low teens to low 20s, generally with terms lasting nine months to two years, Merchant Growth says.
If a business chooses not to refinance, owners will be charged a much lower five per cent in interest a year — but that’s on the significantly bigger $60,000 total rather than $40,000.
Ottawa recognizes that some small businesses will choose the refinancing option. A spokesperson for Finance Minister and Deputy Prime Minister Chrystia Freeland told Global News in a statement the CEBA program was designed to give owners options.
“If you are a small business owner and do not currently have the funds to repay your CEBA loan, you can decide to refinance and benefit from additional time to receive the partial loan forgiveness. Alternatively, if you do not want to refinance your CEBA loan, you have three years to repay it in full. This flexibility is significant support for small businesses who might still be struggling to make ends meet,” spokesperson Katherine Cuplinskas said in a statement.
The “additional time” referenced is a lesser known part of the CEBA program: if businesses apply to their original banks to refinance before Jan. 18, they can have until March 28 to pay back the loan, and keep the forgivable portion. They can also apply to an independent third party lender, but need to apply to the original bank as well.
The latest numbers from the finance department are from the summer, and estimate only one in five of the 900,000 businesses have repaid their CEBA loans, though they expect a big rush right up the Jan. 18 deadline.
Concordia University economics professor Moshe Lander says the big banks in Canada still control 80 to 90 per cent of deposits and loans. But the cheaper set-up costs for online non-traditional banks set the stage for them to grow.
“As the cost of technology is getting cheaper and cheaper, these pop-up banks are now saying we’re going to take a swing at this,” he tells Global News.
“Those low costs of entry are going to have somebody come along with the killer app or the killer way that, especially with young people, they’re going to say, ‘Hey, I’m not committed to the Big Six,'” Lander says.
As for Harasyn, he calls his refinancing a blessing.
“Without it, I don’t know what we would do.”
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