CFIB Urges Trudeau Government to Extend CEBA Loan Deadline and Save Struggling SMEs

2023-06-13 04:00:00

Even though the economy has been running smoothly for more than a year, some 43% of the 898,271 Canadian SMEs that have benefited from the $49 billion in federal loans granted under the CEBA (Canada Emergency Business Account) are still struggling with a precarious financial situation.

Set up by Justin Trudeau during the first months of the COVID-19 pandemic, the generous CEBA has provided SMEs with interest-free loans ranging from $40,000 to $60,000, of which $10,000 to $20,000 is converts into a grant when the loans are repaid before the deadline, which is by December 31.

That said, of the 386,250 SMEs in financial difficulty, the Canadian Federation of Independent Business (CFIB) estimates that approximately 250,000 the number of SMEs are at risk of closing their doors in the short term, including 45,327 in Quebec.

Deferral request

This is why CFIB leaders are currently urging the Trudeau government to postpone the current December 31 deadline by one year, ideally two years.

This is for two basic reasons:

• One, to allow SMEs in financial difficulty to benefit from additional time to restore their finances, while continuing to benefit from an interest-free loan.
• Two, in order to give the beneficiaries of the CEBA the chance to repay their loans within a new required period, a question of also being able to benefit from the subsidy portion ($10,000 to $20,000) attached to the CEBA loans.

In the event of a refusal

If the federal government sticks to the December 31 deadline, defaulted loans will be subject to 5% annual interest charges for the next two years, while loan holders lose the attractive grant portion.

Parenthesis: following these two years (2024 and 2025), the loans will have to be repaid, which will force SMEs to refinance themselves.

Given the very sharp rise in interest rates, you are going to tell me that borrowing at 5% for an SME over the next two years is not expensive these days.

You are right. But when you are in a precarious financial situation, the slightest additional expense unfortunately becomes a heavy burden.

The bulk of SMEs in a precarious financial situation are currently found in the arts, recreation, information, accommodation, catering and social services (non-profit organizations) sectors.

The challenge for Ottawa

If 20% of SMEs that received $40,000 to $60,000 in financial assistance under the CEBA were to close their doors while not repaying their loans, this suggests that the federal government would lose approximately $10 billion, which should obviously be supported by an equivalent increase in the federal debt.

One thing is certain, it is not the 230 financial institutions through which the loans of $49 billion from the CEBA were granted that will lose money.

Oh what a non !

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