Local small businesses struggle with CEBA repayments

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A pandemic lifeline may now be dragging local businesses to their demise.

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The Canada Emergency Business Account was issued to companies as an interest-free loan, with a portion of the up to $60,000 forgivable if repaid by the deadline.

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That deadline is Dec. 31, and the Canadian Federation of Independent Business say 20 per cent of small businesses in Alberta could be at risk of closing due to an inability to meet the cut-off.

Noah McDonald, the owner of The Mobile Accountant, said many businesses are still recovering from the effects of COVID-19.

“The 2023 deadline has come up a lot faster than they anticipated, and they’re . . . still trying to cover operating costs,” he said. “They’re not quite at the point where they can cover debt repayment costs and so they are stressing, because now they’re going to be faced with interest charges starting in January 2024.”

Businesses will face five per cent interest on loans if they fail to pay it back by Dec. 31

McDonald’s works with a number of Calgary small business owners. He noted businesses generally fall into two camps: those who took CEBA as a backup during the pandemic and have already paid it back or are set to, and those who relied on it to survive more than two years of public health orders and shutdowns.

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The second group is at risk. This generally includes businesses in the personal services sector, hospitality, and the arts, recreation and information sector.

The federal government has already extended the deadline from the end of 2022 to 2023, but most of these at-risk companies are still digging out from COVID. If they fail to pay back the loan by Dec. 31.5 per cent interest gets tacked on to the balance.

CFIB released a report recently showing 20 per cent of Alberta businesses were at risk, which works out to more than 34,000 small businesses.

The group pushed for the second extension before the federal budget this spring, proposing a trade-off with the forgivable portion of the loan after a certain point — shrinking the forgiven portion by the month — to encourage repayment instead of an all-or-nothing proposition. But so far there has been no movement from Ottawa.

The CFIB said the average Alberta small business is still carrying $85,000 to $100,000 worth of pandemic-related debt. According to the organization’s latest survey, 81 per cent of their Alberta members are still carrying COVID debt while 58 per cent are not returning to normal sales, while battling inflation and shrinking margins.

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Issue will be brought to the attention of several MPs who visit for Stampede: Yedlin

According to The Canadian Press, Equifax Canada said that while business’ total outstanding balance on bank-issued instalment loans dropped by 2.4 per cent year-over-year in the first quarter, credit card balances grew by 15 per cent and lines of credit by 11 per cent. The report says the interest-rate hike by the Bank of Canada has caused many businesses to shift the type of credit products they are accessing. It all adds up to a growing mountain of debt.

The CFIB has since started a petition to pressure the government into reconsidering an extension.

“What they need right now is clarity and certainty,” said Andrew Sennyah, a senior policy analyst in Alberta for CFIB. “And the sooner the federal government gives us clarity and certainty as to what happens with the CEBA loan, the better.”

This is also a priority for the Calgary Chamber of Commerce.

Deborah Yedlin, president and CEO, said they do not have exact numbers on how many local members are struggling with the deadline, but if even a portion of those struggling close down it will have drastic economic effects on the city.

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“We have the highest concentration per capita of small businesses in the country,” she said. “Our small business community is large, it’s of consequence and the last thing we want to see is a business challenge because of a repayment schedule that is not necessarily in keeping with where we are from an economic standpoint.”

Yedlin added that the fact that the federal government has already extended the deadline once shows they are willing to listen to the concerns of the business community. She noted many MPs came to Calgary for the Stampede and the chamber would make sure the issue was brought to their attention.

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Twitter: @JoshAldrich03

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