The economic pressures from the pandemic still linger on Erik Joyal’s books.
Joyal, a partner at Ascari Hospitality Group, is one of 900,000 business owners across the country who took out a Canada Emergency Business Account (CEBA) loan to help stay afloat during the darkest depths of the COVID-19 pandemic.
Like many of those businesses, he’s still chipping away at the balance and, as the deadline for paying back enough of the loan to receive forgiveness for a portion of it approaches, is starting to become concerned.
“If were in a position to pay it all right away and get it off my book, I would,” he said. “But the reality of the hospitality climate makes that difficult.”
Businesses have been pressuring the government to extend loan forgiveness deadlines as they struggle to return to where they were prior to 2020.
Businesses could borrow up to $60,000 in interest-free loans to weather the pandemic and be forgiven for 33 per cent of the sum if they repay it by Jan. 18, after Ottawa extended the deadline from Dec. 31 earlier this month. If they can prove they are working with the bank they arranged for the CEBA loan through, they can have the date for forgiveness pushed to March 18.
At the suggestion of the federal government, some are exploring financing to help pay back the CEBA loans to hit the forgiveness deadline, but it means taking on interest to pay back an initially interest-free loan.
Ottawa also announced it was pushing back the deadline to have repaid the loan from the end of 2025 to the end of 2026.
Still, Joyal said, he’s one of those weighing taking on another loan to pay back off his CEBA sum. But it’s not a simple decision to take.
“The pro of it is, depending on how you refinance that debt, essentially you’re kicking it down the road a little bit longer and it makes it more manageable in the short term,” he said. “In the long term you may end up, in affect, paying more. I don’t think there’s a perfect solution.”
Others say the federal government is not doing enough to ease the burden.
Dan Kelly of the Canadian Federation of Independent Business said Ottawa’s urging the taking of another loan to pay back CEBA loans is a “ludicrous” suggestion.
“I just think that is such a shocking thing for the government of Canada to advise business owners,” Kelly said. “It is (the same as) telling the cash strapped homeowner that has a big Visa bill to take out a Mastercard to pay it.”
Not only is it not enough, he said, when Ottawa announced its extension it was handled in a way giving the false impression the forgiveness period was also extended by a year.
He said he’s been getting phone calls from businesses mistakenly thanking the CFIB for its work to get the forgiveness deadline extended for a year, to which he must then “break the news” the extension was not as long as they thought.
Kelly worries some businesses will lose out on the chance to find alternate arrangements to pay, which for some businesses could be a final blow to already weakened finances.
He said by not extending the forgiveness period longer, the federal government upset more businesses.
“Honestly, I think it would have been better for them to have done nothing,” Kelly said. “It has made business owners even angrier than they were in the first place.”
Kelly said a lot of businesses don’t have good enough credit to borrow the money to repay their CEBA loans. Meanwhile, small businesses are still not bringing in the revenue they did before the pandemic.
Katherine Cuplinskas, spokesperson for Finance Canada, said in a statement said the government’s changes have added options for businesses working to repay their loans.
“The bottom line is that, if you are a small business and do not currently have the funds to repay your CEBA loan, you now have three years to repay it in full,” Cuplinskas said in a statement. “The additional flexibility that we announced is significant support for small businesses who might still be struggling to make ends meet.”
Kelly said the CFIB is now asking the government to give business owners until the end of 2024 to take advantage of loan forgiveness.
He added more efforts to bring attention to the current deadline needs to be done so business owners realize it is closer than they may realize.
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