THUNDER BAY — The first of two deadlines for the repayment of Canada Emergency Business Account (CEBA) loans is quickly approaching. On Jan. 18, businesses must prove that they are getting their banking and finances together for the mid-March repayment.
Thunder Bay Chamber of Commerce president Charla Robinson noted the chamber is helping to circulate a petition for an extension of the repayment deadline that has been gathering support since November.
She says the problem isn’t just about the need to pay the loan back. There are layers, beginning with the way that the loan forgiveness process works.
“Right now, if you can’t pay the whole thing back, you don’t get the $20,000 forgiveness (shaved off the $60,000). That adds on to your loan,” she said. “The biggest challenge is if you can’t pay it all off before this mid-March deadline, then your loan is going to be for the full $60,000.”
Robinson pointed out that many of these small businesses are forced into taking out a personal bank loan to pay off the $40,000 by the deadline to “get” the $20,000 forgiveness. Achieving that forgiveness sum is becoming a real challenge for businesses.
“The other piece is if you don’t pay it off by the deadline, then it’ll automatically roll into a (government) loan payable within a certain pay period with a five-per-cent interest rate tacked on. That loan would be for the full $60,000,” she explained. “If a business owner wants to pay it off now and (meet the deadline for $40,000), they have to get a bank loan and are now looking at upwards of 10 per cent in interest rates.”
Robinson says there is a lot of number crunching happening to determine if it’s more feasible to pay a lower interest on the $60,000 government loan or a higher interest on $40,000 through the bank loan.
To add to the frustration, Robinson says some of these businesses are being refused a bank loan because they don’t have the capacity to add to their debt load.
According to a recent Statistics Canada survey on business conditions, only 20 per cent of people who took out a CEBA loan have fully repaid it as of this deadline. Around 30 per cent said that they didn’t know if they would be able to repay their loan.
Robinson said businesses in the accommodation, food service, and tourism sectors took the loans because they were very highly impacted by the COVID pandemic.
“Now we’re in a bit of a tightening of the economy and those are the same businesses that may not be having positive projections of what’s going to happen in 2024-2025,” she said.
“Inflation means that people aren’t going out to eat at restaurants as much, (or) travelling or spending the same as they were. That inflation has slowed down the opportunity for those businesses to be successful in the next couple of years because they’re concerned about the lack of confidence in the economy.”
Robinson clarified the two different deadlines. Businesses are to “be in conversations” about getting financing by Jan. 18.
“The second deadline in mid-March is the final date where they have to have their financing finished and they have to sign on the dotted line,” she added. As long as they’re in discussions with the bank before this mid-January framework, they can get that extra couple of months to finalize that financing plan.
“It’s not a lot of time for folks to make very difficult decisions about the future of their business and the amount of loan payments that they’ll be making and adding to their monthly costs based on some of the other economic factors that are happening.”
The Chronicle Journal / Local Journalism Initiative
