Pandemic loan pressures about to hit local businesses

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Small businesses, banks and the federal government are preparing for Jan. 18, the day Canadian Emergency Business Account (CEBA) loans come due.

On that date, at least $40,000 of the $60,000 doled out by the federal government at the start of the pandemic in the form of a CEBA loan must be repaid.

As of press time, the federal government had not opted to push back the due date any further.

For some business owners, Jan. 18 payback is no big deal. Others will have to take out a loan, and there are some who will just not be able to handle it financially, resulting in them going out of business.

Stuart McFadden, director of economic development for the Municipality of Chatham-Kent, said he’s concerned for local businesses over the loan call.

“Nine out of 10 small businesses used the CEBA funding. Seven out of 10 have not yet repaid it,” he said. “It’s put a lot of pressure on businesses, given the timing.”

McFadden said it would have made sense for the federal government to push back the deadline for payback of loans to a later date. The Canadian Federation of Small Business (CFIB) was calling for more time, while at least one online petition asked for it to be delayed until Dec. 31, 2025.

“We have 13 premiers across Canada that said it is the right thing to do for businesses right now,” McFadden said of extending the deadline at least to the end of 2024. “For whatever reason, the federal government decided not to extend it.”

Higher interest rates, higher wage rates, including minimum wage, and inflation are hurting small businesses, McFadden said.

“Giving them an extension is the right thing to do. They’re not asking for absolution. They just need more time,” he said. “I think that’s something that should be granted, given everything else that is going on. Now is just the wrong time (to call the loans due).”

One area of particular concern is the food and beverage industry. According to Restaurants Canada, one in five restaurants that received a CEBA loan are in danger of closing one or more of their locations.

“Currently, a staggering 53 per cent of restaurants are operating at a loss or barely breaking even compared to 10 per cent pre-pandemic, underscoring the obvious connection to this unique and devastating period in our industry and the urgent need for further support and assistance,” the restaurant organization said in a media release.

McFadden said numerous restaurants around Chatham-Kent face the challenge of finding labour while at the same time addressing wage pressures, cost of goods, etc. Some are still operating at reduced hours, which means reduced revenue.

Denny Vervaet, co-owner of Red Barn Brewing Co., said the craft brewery industry is in a bind as well, as the Canadian Brewers Association said that 10-15 per cent of all breweries across the country could face closure this year.

“Since September, I’ve heard of probably one (closing) every two weeks,” Vervaet said.

McFadden said the CEBA loans helped many businesses survive the pandemic, but CFIB figures indicate only half of small businesses are back to 2019 levels of sales, and the average business has taken on tens of thousands of dollars in new debt just to survive.

Vervaet said the CEBA loans were vital to helping small businesses remain open in some manner during the pandemic.

“It was a great opportunity at the time to help any business that could receive the loan to keep their doors open,” he said. “We used it to keep the lights on.”

But the patrons have not returned to pre-pandemic levels for many businesses, not just craft breweries, Vervaet said.

“Now people have to find 40 grand. That’s kind of a big task,” he said. “On Jan. 18, it’s going to be the day. Unfortunately, you’re going to see a lot of businesses going under. They’re not going to be able to pay it back.”

Vervaet said Red Barn will be able to pay off the loan, but that doesn’t mean it was just business as usual.

“For us, we’ve been smart about it. We’re going to be able to meet the deadline. It’s still a scary thing,” he said. “I’m nervous for some of the small businesses around this area.”

Vervaet encourages residents to support local businesses as much as possible.

“Get to know your businesses and business owners around town,” he said.

 

 

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