The Canadian government has decided to extend the deadline for repayment of emergency loans offered to small businesses during the COVID-19 pandemic. This measure, meant to provide businesses a little more respite, was announced on Thursday by Prime Minister Justin Trudeau and the Liberal government, overriding a previously staunch position that repayment deadlines were irrevocable.
The move comes as a response to persistent appeals from small businesses across the nation. Numerous groups representing hundreds of thousands of these businesses had been lobbying the government for a two-year grace period along with the maintenance of access to the forgivable portion of their loans.
However, the announcement on Thursday appears not to match the expectations of the advocates, offering less relief than anticipated.
The Canada Emergency Business Account (CEBA) program was set up as a lifeline when the pandemic first hit, filling the cover of a collection of financial aids designed to keep businesses viable amidst stringent health restrictions and closures. Originating as a $40,000 interest-free loan for small businesses and non-profits experiencing decreased revenue due to the pandemic, the program later expanded to a potential $60,000 loan.
Between April 2020 and June 2021, almost 900,000 businesses applied for these loans, culminating in a massive $49.2 billion in federal assistance handed out.
In the recent fallout of the Omicron variant and subsequent impositions, the Liberals declared an extension to the repayment deadline. This allowed eligible businesses to repay by Dec. 31, 2023, and still qualify for debt forgiveness on one-third of their loan, up to $20,000. Further information reveals that the repayment grace period has seen a minor extension to Jan. 18, 2024, with a clause that allows lending banks to extend this further to March 28, 2024, for businesses seeking refinancing.
Earlier plans involved conversion of outstanding loans post-2023 deadline into two-year term loans at a 5 per cent interest rate, starting on Jan. 1, 2024, and due fully by Dec. 31, 2025. This plan seems to have been revised, providing businesses that cannot repay their CEBA loan in time to qualify for partial loan forgiveness until Dec. 31, 2026, for the full repayment of their loan.
The lengthening of the repayment period was met with disappointment by the Canadian Federation of Independent Business (CFIB), criticizing that the plan doesn’t address the loss of the forgivable loan portion. Echoing similar sentiments, several other business entities including the Tourism Industry Association of Canada (TIAC) stated their disappointment and concern, arguing that this does not virtually alleviate the unprecedented financial pressure confronted by many businesses.
With federal statistics revealing that only about 21 per cent of businesses having repaid their CEBA loan by May 31, the current extension, though helpful, may not be adequate for the multitude who are struggling to recover in the aftermath of the pandemic.