Business insolvencies in Canada jumped by 129.3 per cent in January 2024
Nearly a quarter of small businesses in Canada have been forced to take on new debt to refinance their Canadian Emergency Business Account (CEBA) loans in order to retain access to the forgivable portion, the Canadian Federation of Independent Business (CFIB) says in new revelations surrounding the ongoing CEBA repayment debacle.
In addition, says the CFIB, there were over 50,000 small firms (6 per cent) that were recently pursuing a special extension for those in the process of refinancing.
“Many of those businesses that had to borrow to repay their CEBA loans are facing high interest rates and will be challenged to meet their payment obligations,” said Dan Kelly, CFIB president.
Debt didn’t go away
“We need to remember while government got a lot of CEBA balances repaid, the debt for many businesses didn’t suddenly go away – it just shifted from a low interest government-backed loan to a higher interest bank loan,” Kelly continued.
‘The debt for many businesses didn’t suddenly go away‘
Canadian Federation of Independent Business president Dan Kelly
“This should sound the alarm for policymakers, particularly given the business insolvencies are surging,” he said. The business environment in Canada is far from being back to normal, according to the CFIB.
CFIB data shows that the financial situation of their business is the primary concern for one in five small business owners. Business insolvencies are soaring, having jumped by 129.3 per cent in January 2024 compared to January 2023, while the latest data available shows more businesses were closing than opening in December 2023.
CFIB recommendations
As the government is winding down its CEBA program, CFIB is calling on Ottawa to:
- Implement a review process for CEBA loan holders deemed ineligible and introduce a three-year repayment plan.
- Ensure the maximum flexibility is used for those who attempted to take out a refinancing loan to use the special extension to March 28. CFIB urges banks to accept any form of communication requesting refinancing as sufficient proof for the extension.
- Look at new ways to lighten the debt load for those who were unable to meet the January 18 deadline.
‘Many feel abandoned’
“Small business owners face massive debt loads and cost increases,” said Corinne Pohlmann, executive vice-president of advocacy at CFIB. “And many feel abandoned by the government and the way it handled the repayment of the CEBA program.
“Ottawa should do more to help them deal with the high cost of doing business and provide concrete financial relief measures in the upcoming federal budget, such as lowering the Employment Insurance premiums for small employers and returning the $2.5 billion in carbon tax revenue owed to small businesses,” adds Pohlmann.
