Business owners face 'tipping point' for federal pandemic loan repayment cut-off

Edmonton business owners are doubling down on holiday sales, scrambling to negotiate new bank loans and even digging into personal savings to meet the impending repayment deadline for a government-backed pandemic loan.

The federal government rolled out the Canada Emergency Business Account, or CEBA, in April 2020. The program initially offered $40,000, then an expanded total of up to $60,000 in interest-free loans for small- and medium-sized businesses.

Business owners who borrowed $40,000 or less can get up to $10,000 of the loan forgiven, and those who took the maximum $60,000 can get $20,000 of forgiveness.

But that applies only if the rest of the outstanding balance is repaid, or business owners can prove they've applied to refinance, by Jan. 18, 2024. Otherwise, the total amount converts to a three-year loan at five per cent interest per annum.

Peter Keith, co-owner of catering and charcuterie market Meuwly's, told CBC News he's among the business owners trying everything to maximize cash flow this month to put together the CEBA repayment money.

"We all kind of have an internal number that we know that's how much cash needs to be in the bank Dec. 31 just to get through January, let alone to repay a $40,000 loan," he said.

For Keith, refinancing and taking on a new interest payment is a last resort, so in addition to regular sales, the store is promoting things like event ticket presales and bonus credit on gift cards.

In total, Ottawa handed out more than $48 billion in CEBA loans to almost 900,000 businesses across Canada. In Alberta, $6.8 billion was distributed to 125,015 businesses — the third-highest number in the country, after Ontario and Quebec.

Keith believes his business model is sustainable enough that Meuwly's will be OK next year, but he thinks many small businesses are in dire straits, quietly trying to find a way to make the numbers work behind the scenes.

"People are kind of at the end of their rope to keep going, keep pushing, keep scraping together those last few dollars," Keith said.

"For a lot of small business owners, this probably will be the tipping point that they decide not to keep pushing, not to keep going, and they'll go for bankruptcy instead."

Jessica Harquail, an accountant who works with businesses at Edmonton firm Givens LLP, said she's been speaking with her clients about options for their CEBA loans since early 2023.

She stressed that business owners have options, and they should seek out advice if they need it.

But for many small businesses that are still in recovery from the pandemic, "The $40,000 is almost crippling," she said.

Some are facing the difficult choice of planning an "exit strategy" if they can't find another option.

One in five Alberta small businesses at risk

Andrew Sennyah, Alberta senior policy analyst with the Canadian Federation of Independent Business, said about 90 per cent of businesses across the province received money through CEBA, and the vast majority still have yet to repay.

CFIB has been calling for the deadline to be delayed again, a message echoed by premiers of every Canadian province and territory.

Sennyah said between the financial blow from years of COVID, rising costs from inflation and affordability struggles keeping some customers away, many businesses just can't make the numbers work to clear their CEBA debt now.

In Alberta, CFIB estimates one in five small businesses could be at risk of shutting down.

"Those are not promising numbers by any stretch of the imagination," Sennyah said.

"Businesses are frantic."

Katherine Cuplinskas, spokesperson for Deputy Prime Minister Chrystia Freeland, said in a statement that "additional flexibility" already announced for CEBA is significant.

"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."

Cheryl Schneider owns No More Excuses Fitness in east Edmonton. Gyms and fitness studios were either completely closed or operating with reduced capacity for about two years due to government health restrictions. 

She said she would have liked to see an industry-specific approach to repayment instead of applying the same requirements across the board.

"To ask a business to pay it back now with the economy the way it is ... and we're one of those industries that when times are tough, people really have to dig deep. And either it's food on the table or going to a gym — what loses in that scenario?"

She's in the process of getting a new loan so she can meet the 2024 deadline — something she said she's never had to do over more than a decade in business.

"We're just getting back on our feet, and it's going to take a couple of years."

Ed Donszelmann told CBC News that the CEBA money was the difference between survival and closure when COVID-19 restrictions forced his restaurant, Otto Food and Drink, to shut its doors.

But with the cutoff looming to repay or miss the forgiveness window, he hasn't seen the kind of recovery that will leave his business with $40,000 cash to spare by the end of the year.

"The restaurant can't afford to pay it back, so it will come out of my own pocket," he said.

"We're very fortunate that it's doable for us. I can't even imagine what some of these smaller businesses are going through right now."