BIZ-KILL

Some small businesses now told ineligible for CEBA loans could fold: CFIB

Many small businesses found ineligible for federal COVID-19 emergency loans will struggle or even fail as they attempt to repay the previously forgivable portions, the Canadian Federation of Independent Business (CFIB) says.

Corinne Pohlmann’s CFIB’s senior vice president for national affairs and partnerships, said the calls from concerned business owners began two weeks ago as they were notified that they were not eligible for the Canada Emergency Business Account (CEBA) loans they received, including a forgivable portion of $10,000 – $20,000.

“There’s definitely a lot of anxiety permeating out there,” Pohlmann said. “There are certainly a lot of people who are fine and are going to continue to do fine, but we’re worried about those that were probably in those sectors most hit by COVID who are still struggling to get back on their feet given inflation and costs and labour shortages and all the rest of it.

“That’s delayed their ability to get back to normal again,” she said.

The CFIB is also asking the federal government to increase the forgivable portion for all CEBA loans to at least 50% and to stretch the repayment deadline another year to December 2024.

The CEBA loans handed out by the Justin Trudeau government in two waves during the pandemic, provided businesses with an interest free loan of $40,000-$60,000 to be paid back – minus a forgivable portion on full repayment by the end of 2023.

Thousands of businesses are now being contacted by their financial institutions to repay the entire loan, CFIB says.

Legitimate businesses who applied in good faith based on the information they had at the time should be given a chance to find another solution or at least keep the forgivable portion, Pohlmann said.

“The eligibility rules ended up being somewhat complicated,” she said. It was definitely a challenge, I think, for certain segments of small businesses, especially very small ones, because they often had to go to this other process to access the CEBA loans and it became a real nightmare for some of them to do that.”

The federal government had to move quickly on the first round to get CEBA loans to businesses but brought in more rules during the second wave of loans which were confusing, she said.

“We know on average small businesses still have about $140,000 in debt… that’s COVID related debt,” Pohlmann said. “They’re still reeling in that debt and so if one piece that they were hoping to get forgiven isn’t, that just adds on to debt that they’re already struggling under.”

In a statement, Global Affairs Canada said that the federal government has had the backs of small businesses and entrepreneurs from day one of the pandemic, providing loan supports through CEBA to 900,000 businesses.

Financial institutions conducted initial checks from the inception of the program in June 2020, including confirming applicants  had an existing business deposit account opened on or before March 1^st of that year and competed an attestation that they met all eligibility requirements.