The deadline to repay a federal business loan granted during the COVID-19 pandemic arrived Thursday, adding strain to the financial woes of countless businesses across the country.
Nearly 123,000 B.C. businesses accessed the Canada Emergency Business Account (CEBA) while lockdowns impacted their bottom lines, adding up to more than $6.6 billion in borrowed cash.
Matthew Senecal-Junkeer described today as a “pretty scary day” and one that he’s been “dreading.”
“When COVID happened, we took the loans and a lot of that money went to rent and to payroll,” the Hunnybee Bruncheonette co-owner said. “It means every month now, we’ve got a mandatory payment for interest and for principal … now it’s accumulating a pretty considerable amount of interest pretty quickly for a small business.”
Many businesses owners said they do not have the funds to repay the government. That includes one of Vancouver’s most popular Mexican restaurants, La Catrina, which closed in late October. At the time, the owner’s stepson, Jose Mariscal, said the decision was not easy for the family.
“It was a beautiful experience (running the business) here in English Bay. There were a lot of events here but the winters are slow and rent is expensive,” he said. “We could not afford to pay back our $60,000-CEBA loan.”
In November, the industry association representing B.C.’s craft breweries said up to 15 per cent of its members are facing the possibility of closure. Ken Beattie, executive director of the B.C. Craft Brewers Guild, said the once-booming industry — which has grown to 240 breweries in recent years — is also facing surging costs.
“Man, it is super tough, because every cost, every input has increased … whether it be the barley, the hops, the packaging, the cans, fuel surcharges, distribution, absolutely everything has skyrocketed,” he said in a previous interview. “There is a cash flow problem in the industry because of the increased costs, and you’re just layering on more challenge and more cashflow issues — you have to decide is it worth the repayment of the loan or is it worth risking businesses.”
Mark von Schellwitz, western region vice-president for Restaurants Canada, said his organization vouched for a “win-win” scenario — for every six months of late repayment, it proposed restaurants lose five per cent of their forgivable portion.
“We’re in a situation right now with all these post-pandemic headwinds where we’ve got more than half the industry that’s not making any money,” he said. “Restaurants are in a fragile state.”
Last year, restaurant bankruptcies in Canada increase by 50 per cent, he added. If governments want to help, von Schellwitz advocated for making businesses lunches 100-per cent deductible as an expense, to drive more customers into restaurants.
On Thursday, Canadian Federation of Independent Business CEO Dan Kelly said an estimated 900,000 Canadian businesses took out a CEBA loan, and a good chunk of them likely won’t meet the deadline for interest-free repayment.
“As a result, their debt is going to increase by 50 per cent. Tomorrow, Friday, their debt goes from $40,000 to $60,000 if they weren’t able to repay the loan as of today,” Kelly explained. “That is scary … I’m deeply worried about what’s going to happen in the months ahead.”
Across the country, business advocacy groups and a handful of premiers have called on Ottawa to extend the CEBA repayment deadline. The federal government has already done so, twice. The first deadline was Dec. 31, 2022. It was extended to Dec. 31, 2023, and again to Jan. 18, 2024. Prime Minister Justin Trudeau made it clear Wednesday that Ottawa would not move the date a third time.
According to the federal government, $20,000 will be forgiven and no interest will be charged on a loan of $60,000, as long as $40,000 is repaid today. Similarly, $10,000 will be forgiven on a $40,000 loan if $30,000 is repaid by the deadline.
As of Friday, outstanding loans will convert to three-year term loans, subject to interest of five per cent per annum.
— with files from Simon Little, Elizabeth McSheffrey and Craig Lord