Canada’s new Small Business Minister says Ottawa’s decision to extend the period small businesses have to repay pandemic-era loans, but not extend the time they have to receive partial debt forgiveness, is a “very unbalanced decision.” He said it was a “fiscally responsible” move. But business groups are still not satisfied.
“The decisions we made were a result of listening,” said Recy Valdez, who succeeded Mary Ng this summer. “Right after taking the oath of office, I traveled around the country and met with various small businesses. What they were looking for was flexibility and time, and that’s why we provided that extension. .”
Canada Emergency Business Account (CEBA) interest-free loans of up to $60,000 have been provided to approximately 900,000 small businesses until June 2021 to help them deal with the economic impact of the pandemic.
Until last month, businesses could receive up to $20,000 in loan forgiveness grants if they repaid their loans by December 31, 2023. Otherwise, the loan will accrue interest at 5% per year and the full principal amount will be due by December 31, 2025.
Several business groups are calling on Ottawa to give them access to exempt subsidies, as they warn thousands of small businesses have yet to recover financially from rising costs and are on the verge of bankruptcy. They also requested that the repayment deadline be extended by at least one year.
In mid-September, the government extended the loan repayment deadline by one year to December 31, 2026, but the deadline to qualify for up to $20,000 in forgivable grants was extended by just 18 days to January 18, 2024. .
Loanholders who apply for refinancing with the financial institution that provided the CEBA loan by January 18, 2024 will have their repayment deadline extended to March 28, 2024 to qualify for partial loan forgiveness. can. But some say the terms only encourage companies to pay back. one loan to pay off the other.
“The Minister is right. Businesses wanted flexibility and time. But they wanted flexibility and time within an acceptable deadline,” said the minister, representing around 97,000 small and medium-sized enterprises. said Dan Kelly, chief executive of the Canadian Federation of Independent Business. “The companies I spoke to weren’t focused on the December 2025 date, but they have adjusted that date.”
According to CFIB data released on September 28, 80% of small businesses do not feel the federal government’s changes are beneficial, and only 34% are able to repay their loans on time.
Mr Kelly said the minister’s “fiscally responsible” explanation for the extension was “short-sighted” and said he believed the federal government had a better chance of getting the money back if it showed more patience.
“You can come up with billions of dollars in a matter of weeks to finance a battery factory, and yet extending loan repayment terms for small businesses seems like an area where Ottawa is suddenly becoming more fiscally conservative.” he said.
As of September, only 18% of businesses had repaid their CEBA loans in full, according to an ongoing CFIB survey. But Valdez expects that number to increase in the coming weeks.
“To be fair, a lot of small businesses were waiting for our announcement,” she says. “From the several interviews I’ve had so far, there are a lot of companies, whether it’s credit unions or banks, that are willing to go ahead and pay us back. There’s definitely a portion that is looking to refinance. There are different small businesses at different stages at the moment.”
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The minister added that he will keep an eye on how the situation develops over the coming months and will “get feedback from people and review the situation.”
But that doesn’t necessarily mean Ottawa may offer another extension that would allow businesses to receive partial debt forgiveness.
“These announcements have been made. We have established our position and will continue to talk to small and medium-sized businesses during our travels,” Valdez said when asked about further extensions from the government. Told.
Mr Kelly said he was continuing to press the government for an extension until at least the end of 2024. If that doesn’t happen, CEBA loans to most businesses will increase by about 50%, he said.
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