However, 250,000 firms will be at risk, says CFIB
Rechie Valdez, the small business minister of Canada, has resisted calls to give firms more time to repay their pandemic-era loans from the government even as warnings from a lobby group suggest that 250,000 will be at risk of failure, as reported in an article by Bloomberg.
Valdez asserted that the government has already been flexible in extending the deadline for the loans multiple times as well as offering billions to support small businesses.
“I don’t think we’re giving small businesses enough credit. They’re unbelievably resilient,” said Valdez.
About 900,000 small and medium sized companies received loans amounting to $60,000 from the Canada Emergency Business Account (CEBA) during the economic shock brought by the COVID-19 pandemic. Through the program, the government paid $49 billion to firms in total.
The program also allowed $20,000 of the loan to be forgiven if the rest of the debt was paid off by the end of 2022. This deadline was then extended to the end of this year before being further pushed back to Jan 18, 2024.
A cause for concern for small businesses
According to the Canadian Federation of Independent Business (CFIB), about 250,000 small businesses will be at risk of failure if they miss the deadline and lose the forgivable portion.
After the new deadline on Jan 18, the CEBA loans will be converted to a term loan at a 5% rate with the full repayment due by the end of 2026.
Dan Kelly, the president of the CFIB, said that the situation may not be appealing if the deadline will not be extended further as many small businesses will not be able to survive losing the forgivable portion.
Canadian businesses have struggled to recover as inflation and high interest rates plague the economy. The CFIB business barometer, which measures confidence among small firms, has been at its lowest since April 2020.
However, according to the country’s parliamentary budget officer, it would cost the government an estimated $907 million if the deadline were extended to the end of 2024.
Valdez argued that the government has already invested billions to help small firms and will continue to assist them. Valdez referred to the country’s business benefits finder which helped owners find programs they were eligible for.
“I acknowledge that we are not completely out of the woods as well. I’m not naive,” said Valdez.
“I want small businesses to know that we have provided them with different options to help them through this difficult time.”
