The deadline for the Canada Emergency Business Account (CEBA) loans is here with hundreds of thousands of businesses across Canada facing that repayment, some of them from Saskatchewan.
As of Friday, outstanding loans will convert to three-year term loans, subject to interest of five per cent per annum.
Eligible businesses can keep up to $20,000 of the max $60,000 loan if they have repaid the rest by the Jan. 18 deadline.
The latest numbers from the finance department are from the summer, and estimate that only one in five of the 900,000 businesses have repaid their CEBA loans, though they expect a big rush right up to the Thursday deadline, a senior government source told Global News on background.
Brianna Solberg, director of provincial affairs with the Canadian Federation of Independent Business (CFIB), said 2023 was a hard year with the cost of everything going up and that businesses are struggling.
“In many ways, it’s more difficult to be in business now than it was at the height of the pandemic with restrictions,” Solberg said.
She said consumers aren’t spending as much, so many business owners aren’t seeing the same revenue they once did.
Solberg said more than 29,000 businesses in Saskatchewan took out the CEBA loan, saying that accounts for more than $1.6 billion.
She said only 40 per cent of those businesses have paid back the loan and that many businesses say they wouldn’t be able to meet this Jan. 18 deadline on their own.
“Many (businesses) have jumped through hoops to try and get $40,000 to pay back today so that they can keep that $20,000 forgivable portion.”
Jason Childs, an associate professor of economics with the University of Regina, said from a private lender’s point of view, this puts banks in an awkward position.
“It’s going to make you ask questions as a bank. Maybe the margins aren’t there in the business, maybe they’ve not recovered enough and now the bank is taking on that risk for an organization that has struggled,” Childs said.
He said a five per cent interest rate for a business loan is a pretty good deal, and is a bank rate that is generally unheard of for a business loan.
Childs said he felt like the CEBA loan wasn’t created with the planning around whether businesses would be able to pay it back.
“That whole period of time was an absolute mad scramble and I think it was just, ‘Let’s figure out how to keep the lights on and we’ll pick up the pieces later.'”
He said we aren’t seeing the same strength in recovery compared with other areas like the U.S., adding that it’s not surprising that many of these businesses are struggling to pay back this loan.
Jason Aebig, CEO of the Greater Saskatoon Chamber of Commerce, said inflationary pressures and interest rates have been eating into any extra income many small businesses in Saskatchewan have.
“It is ironic that what was intended to be a lifeline or a lifeboat has quickly become an anchor,” Aebig said.
He said he was hoping the federal government would have adjusted the CEBA loan policy to reflect the current situation.
Aebig said they’ve been encouraging businesses to start talking with the original lender of their CEBA loan to look at options for refinancing.
“That deal doesn’t have to be inked by the end of today, but you have to be in the pipeline,” he said.
“Nobody wants to see a good business go down, least of all the employees and the owners of that business.”
A spokesperson for Finance Minister and Deputy Prime Minister Chrystia Freeland told Global News in a statement earlier this week that 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,” spokesperson Katherine Cuplinskas said in a statement.
“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.”
– with files from Global News’ Abigail Bimman and Craig Lord