250,000 Canadian businesses risk closing as CEBA deadline approaches

Canadian Federation of Independent Business urges Ottawa to give more time

According to a new report released last week by the Canadian Federation of Independent Business, nearly 250,000 small businesses – 19 per cent of all small businesses in Canada – could be at risk of closing their doors after 2023 unless the federal government changes the deadline to repay their Canada Emergency Business Account (CEBA) loans.

Seeking extended deadline

Dan Kelly, CEO of the Canadian Federation of Independent Business.

If the deadline isn’t extended, says the CFIB, small businesses will lose the forgivable portion by next December 31, which will add up to $20,000 more to their debt and cause them to face 5 per cent interest on the full balance.

“The message from small businesses is loud and clear: they need more time to repay their CEBA loan,” said CFIB president Dan Kelly.

“With only half of small businesses back to normal sales, most businesses – particularly in the arts, recreation, hospitality and the service sectors – will need more runway. Financial institutions still have time to delay repayment processes if the government extends the CEBA deadline, but that window is closing. Ottawa needs to act now.”

Some key findings

The report by CFIB, entitled Back in Business? Spring Update on Small Business and CEBA, includes the following key results:

  • Of the nine in ten small businesses who used CEBA, three quarters accessed loans between $40,001 and $60,000, while one quarter received loans of up to $40,000.
  • Only 10 per cent of CEBA users have repaid their loans.
  • A total of 43 per cent of CEBA users risk missing the current repayment deadline by end of 2023. Small businesses in the arts, recreation, and information (62 per cent), hospitality (61 per cent) and social services sectors (46 per cent) are most likely to miss the current CEBA deadline.
  • The smallest businesses with 0-4 employees are the most likely to miss the repayment deadline (49 per cent).
  • Even among the 47 per cent of small business owners who indicate they will meet the 2023 deadline, half say they will struggle to do so, and two thirds would like to see an extension of the repayment deadline.

Repayment uncertainty

“Most business owners want to repay the loan on time in order to secure the forgivable portion, but many of them still can’t guarantee they can do it,” said Simon Gaudreault, chief economist and vice-president of research at the federation.

“Our analysis suggests that most small firms expect to struggle in the process, putting their business’ future at risk. The closer we get to the end of this year, the more uncertainty a CEBA status quo will create for thousands and thousands of businesses.”

Relief for small businesses

CFIB is pushing the federal government to provide some relief to small businesses by:

  • Extending the repayment deadline for the CEBA loan to the end of December 2025 or at least 2024;
  • Considering additional debt forgiveness;
  • And implementing an appeal process for CEBA loan recipients that are now deemed ineligible.

“The CEBA loan, which once served as a pivotal economic lifeline during the nearly two years of COVID restrictions, is now a source of immense stress and anxiety for small businesses,” said Corinne Pohlmann, senior vice-president for national affairs at the federation.

More time needed, CFIB says

“Ottawa must give them more time, or we will see more ‘permanently closed’ signs in the coming months. If nothing changes, the consequences will be serious not just for affected businesses, but also for their employees and the wider economy.”

Business owners can sign CFIB’s petition to government to extend the CEBA repayment deadline on the CFIB website. In May alone, CFIB received over 3,500 new signatures, bringing their total to over 23,000 signed petitions from small business owners calling for improvements to pandemic supports and an extension to the CEBA repayment deadline.