Some small business owners in eastern Ontario say the timeline for repaying 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 at ByWard Market for more than 30 years and, until the pandemic, 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 remainder was repaid by a certain deadline.
The original payment deadline was late 2022 and was later extended to December 31, 2023.
“Honestly, it was a blessing,” Nicastro said. “It helped us survive. It helped us relieve the pressure of being closed and not seeing any customers or paying our staff.”
Last week, the federal government announced it would again extend the deadline for debt forgiveness to January 18, 2024.
“When we found out it was 18 days, it was really a slap in the face,” Nicastro said.
The restaurant industry has not recovered
You’ve noticed that customers aren’t spending money like they used to. The inflation rate and cost of living are putting a squeeze on people’s pockets, Nicastro said, and the company’s revenue and customer base have not returned to pre-pandemic levels.
“We thought things would recover quicker, but they haven’t. People haven’t come back downtown and it’s been a challenge.”
While he plans to return $40,000 by the deadline, he has heard from other friends in the industry that they won’t be able to do so.
“They can’t give this back. So they’re just going to call it quits. They’re going to close the doors.”
According to Restaurants Canada, 51 per cent of restaurants across the country are currently operating at a loss or just breaking even. Before the pandemic, it was 12 percent.
Of the 66,000 traditional restaurants nationwide, 54 percent have an outstanding CEBA loan.
“The inability to pay CEBA at this time is a direct result of the inflation they have suffered since attempting to reopen their businesses,” said chief executive Kelly Higginson.
The industry group is asking the federal government for a one-year extension to protect $20,000 debt forgiveness for restaurant operators.
‘Our ability to sell is limited’
Laurie Davey-Quantick is the owner of Verde Alternatives, an environmental general store in Kingston. The $60,000 CEBA loan helped keep her business afloat, but it did not help her recover financially.
“I noticed that from March 17, when we closed, until early 2022, businesses were either completely closed or had mask mandates or other capacity restrictions,” Davey-Quantick said.
“We were limited in our ability to sell.”
He said that in 2023, with interest rates rising and the price of everything going up, the business essentially stagnated. Now that a deadline to pay what you owe is approaching, things are not looking good.
“I don’t have the $20,000 or $40,000 I can give back to the government right now. I can probably find some of it, but that will depend on personal resources,” Davey-Quantick said.
The federal government announced that businesses that refinanced their loans will have until March 28 to qualify for the debt forgiveness program.
Dan Kelly, executive director of the Canadian Federation of Independent Business (CFIB), said this will only create more debt for small business owners and is generally not a viable solution.
“It’s essentially like telling a consumer who is having difficulty paying their Visa bill to simply apply for a MasterCard to resolve their problems,” Kelly said.
Businesses now also have until the end of 2026 to repay their loans in full, but all loans will begin to accrue interest if they are not repaid by January 19.
“Businesses that don’t meet the forgivable component will end up, instead of a $40,000 recovery, with $60,000. They will be given an extra year to do so, but it’s an uphill battle,” Kelly said.
CFIB estimates that if businesses lose that forgivable portion, up to 250,000 of them may not survive.
In a statement, a Department of Finance spokesperson said: “The bottom line is that if you are a small business and you currently do not 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 that may still struggle 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 percent of those companies had fully repaid their loans as of May 31.