Canada extends repayment deadline for COVID-19 emergency loans to small businesses

Prime Minister Trudeau Offers One-Year Reprieve on Repayment of Canada Emergency Business Account (CEBA) Loans

In a significant policy shift, Prime Minister Justin Trudeau announced Thursday that the Canadian government will grant small businesses an additional year to repay their Canada Emergency Business Account (CEBA) loans, offered initially during the COVID-19 pandemic. This decision comes after persistent calls from business groups nationwide to extend the repayment deadlines, which the government had previously deemed “final and cannot be changed.”

“We know that some need a bit more runway,” Trudeau stated, acknowledging the challenges many small businesses face.

Advocates Seek More Comprehensive Relief: While the government’s decision to extend the repayment deadline is a welcome development for many small businesses, it falls short of the two-year grace period and continued access to loan forgiveness that numerous advocacy groups had been urging. CEBA was initially introduced as part of a suite of financial aid measures designed to support businesses grappling with revenue losses due to pandemic-induced closures and restrictions.

Under the program, small businesses and non-profits could initially apply for up to $40,000 in interest-free loans, a limit that was later increased to $60,000. Between April 2020 and June 2021, the loans were approved for 898,271 businesses, amounting to $49.2 billion in federal assistance.

Timeline of CEBA Loan Repayment Extensions: The Canadian government had previously extended the repayment deadline for CEBA loans to the end of 2023 in response to the Omicron variant surge and subsequent restrictions announced in January 2022. This extension allowed businesses “in good standing” to repay their loans by December 31, 2023, to be eligible for partial loan forgiveness, which covered one-third of the loan amount, up to $20,000.

The latest extension, as provided by Deputy Prime Minister and Finance Minister Chrystia Freeland’s department, slightly adjusts the deadline for partial loan forgiveness. It has been moved from December 31, 2023, to January 18, 2024, to accommodate the busy holiday season for Canadian businesses. Additionally, businesses that submit a refinancing application with their loan provider by January 18, 2024, can now benefit from the partial loan forgiveness until March 28, 2024.

If businesses cannot meet these deadlines, their outstanding loans will be converted into two-year term loans with a five percent interest rate, starting on January 1, 2024, and due in full by December 31, 2025.

However, for those businesses still unable to repay their CEBA loans by the revised deadlines, a new extension allows them until December 31, 2026, to repay the full loan amount.

Business Groups Express Disappointment: The Canadian Federation of Independent Business (CFIB) expressed disappointment with the government’s announcement, emphasizing that it did not address the central issue of the forgivable portion of the loans. CFIB President and CEO Dan Kelly stated that while the additional year for full repayment is helpful, it falls short of what businesses truly need, urging the government to reconsider.

Tourism Industry Concerns
: The Tourism Industry Association of Canada (TIAC) also voiced concerns about the announcement, stating that while they appreciate the extended timeline for CEBA, the forgiveness period provisions remain insufficient. TIAC President and CEO Beth Potter emphasized that a mere three-month extension for businesses needing to refinance does not align with the gravity of the crisis many tourism businesses face.

Challenges Persist for Small Businesses: As of May 31, 2023, approximately 21 percent of businesses that received CEBA loans had fully repaid them, according to federal statistics. The reluctance to fully repay loans underscores the ongoing challenges small businesses face in Canada, including supply chain disruptions, hiring difficulties, and high inflation. Many local businesses, particularly in the tourism sector, risk permanent closure without further relief measures.

Based on CFIB data, losing access to the forgivable portion of the loans could jeopardize the future of up to 250,000 small businesses in Canada, highlighting the urgent need for more comprehensive support to aid in their post-pandemic recovery.

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