As federal pandemic-related business loans come due this week for nearly 900,000 Canadian businesses, including many here in Chatham-Kent, financial institutions are experiencing a flood of business.
Dave Wilson, senior director for retail and small business for WFCU, said their branches have seen “a big pickup of activity” in advance of the Jan. 18 payback deadline.
The small businesses that took out up to $60,000 in CEBA (Canadian Emergency Business Account) loans during the COVID-19 pandemic can either pay back $40,000 to have the remainder forgiven by the government, take out a loan to cover the $40,000, or pay through the government on the full amount.
When the program was initially rolled out in the spring of 2020 as the pandemic forced the shut down of most businesses across the country, providing $40,000 in loans for eligible businesses. In early December of 2020, that funding was expanded to $60,000.
Despite the concern and complaints by organizations such as the Canadian Federation of Independent Business (CFIB), Wilson said, judging by appearances at WFCU branches, the outlook may not be as bleak as advertised.
With 898,271 small businesses across the country accessing $49.2 billion in federal cash through the CEBA loans, the CFIB has lobbied for the deadline to be pushed back to the end of this year. Some say it needs to be pushed until the end of 2025.
But with some sides stating the Jan. 18 deadline could force thousands of small businesses to shut the doors permanently, Wilson said a larger-than-expected number of businesses have been paying off their loans.
“We’ve really been encouraged by the number of CEBA loans that have been repaid,” he said, but could not provide tangible numbers.
For those who won’t have the capital to pay off the loan, Wilson said there are options. The first is to refinance with the institution that administered the CEBA loan. That loan will pay off the CEBA financing, and allow business to pay the bank or credit union back over time, with interest, of course.
Another option is to deal directly with the government, but that comes with some caveats and a tougher payback timeline.
First off, you are responsible for the full amount, as no funds will be forgiven, Wilson said. After that, on Jan. 19, you begin paying monthly interest of five per cent on the principle only. However, the loan has to be paid in full by Dec. 31, 2026.
