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Industry groups call on government for more time to repay loan.
Some small business owners in eastern Ontario say the timeline to pay back the federal government’s pandemic loan is unreasonable — calling the 18-day grace period a “slap in the face.”
Pat Nicastro has owned La Bottega in the ByWard Market for over 30 years and up until the pandemic, he said it was thriving.
Like so many small business owners across the country, Nicastro used the Canada emergency business account (CEBA) as a lifeline.
CEBA allowed a business to apply for up to $60,000. Up to $20,000 would be forgiven if the rest was repaid by a certain deadline.
The original repayment deadline was the end of 2022 and it was later extended to Dec. 31, 2023.
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“It was honestly a blessing,” Nicastro said. “It helped us survive. It helped us ease the pressure of being closed and not seeing any customers and paying our staff.”
Last week, the federal government announced it would extend the deadline for debt forgiveness again to Jan. 18, 2024.
“When we found out it was 18 days, it was really a slap in the face,” Nicastro said.
Restaurant industry hasn’t bounced back
He’s noticed that customers are not spending money like they used to. The rate of inflation and cost of living is tightening people’s pockets, Nicastro said, and the business’s revenue and customer base hasn’t returned to pre-pandemic levels.
“We thought things would bounce back faster, but things haven’t. People haven’t come back downtown and it’s been a challenge.”
While he does plan to pay back $40,000 by the deadline, he’s heard from other friends in the industry that won’t be able to make it.
“They can’t pay this back. So, they’re just going to call it quits. They’re going to shut the doors.”
According to Restaurants Canada, 51 per cent of restaurants across the country are currently operating at a loss or barely breaking even. Before the pandemic, it was 12 per cent.
Of the 66,000 brick-and-mortar restaurants across the country, 54 per cent have an outstanding CEBA loan.
“The inability to pay CEBA back at this point is a direct result of the inflation that they have been hit with since trying to reopen their businesses,” said CEO Kelly Higginson.
The industry group is asking the federal government for a one-year extension to protect the $20,000 debt forgiveness for restaurant operators.
‘Limited in our ability to sell’
Laurie Davey-Quantick owns Verde Alternatives, an environmental general store in Kingston. The $60,000 CEBA loan helped keep her business afloat, but it didn’t help it financially recover.
“I noticed that from March 17 when we closed, straight through until the early part of 2022, businesses were either completely in lockdown or they were having mask mandates or other capacity restrictions,” Davey-Quantick said.
“We were limited in our ability to sell.”
She said in 2023, with interest rate hikes and the price of everything going up, business essentially flatlined. Now with a looming deadline to pay back what she owes, it’s not looking good.
“I don’t have the $20,000 or the $40,000 that I can pay back to the government right now. I probably can find part of it but that’s going to be drawing on personal resources,” Davey-Quantick said.
The federal government announced that businesses that refinanced their loans will be given until March 28 to qualify for the debt forgiveness program.
Dan Kelly, CEO of the Canadian Federation of Independent Business (CFIB), said this will only accrue more debt for small business owners and overall, isn’t a viable solution.
“It’s essentially like telling a consumer that is struggling to pay their Visa bill to just go out and apply for a MasterCard to solve their problems,” Kelly said.
Businesses also now have until the end of 2026 to repay their full loans — but all loans will start accruing interest if not repaid by Jan. 19.
“Businesses that miss out on the forgivable component will end up — instead of a $40,000 payback — have to come up with $60,000. They will be given an extra year to do that, but that’s an uphill battle,” Kelly said.
CFIB estimates that if businesses lose out on that forgivable chunk, up to 250,000 of them may not survive.
In a statement, a spokesperson for the Department of Finance said “the bottom line is that, if you are a small business and do not currently have the funds to repay your CEBA loan, you now have three years to repay it in full.”
“The additional flexibility announced last Thursday is significant support for small businesses who might still be struggling to make ends meet,” they added.
Nearly 900,000 businesses were approved for the program, which distributed just over $49 billion in loans. But only 21 per cent of those businesses had fully repaid their loans as of May 31.
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