She received the CEBA loan more than 3 years ago — her bank now says she wasn't eligible

With a major deadline to repay a pandemic era loan just over a month away, one small business owner says she's only now being told she was never eligible for the money in the first place.

The Canada Emergency Business Account (CEBA) was introduced at the height of the pandemic to help out small businesses forced to close or limit their operations due to public health measures. The program offered interest-free loans backed by the federal government.

A business could apply for up to $60,000 through the program. If businesses repay the bulk of the loan by January 18, up to $20,000 can be forgiven.

Pauline Peng Skinner, who runs a small wholesale business in Richmond Hill, Ont., said she was preparing to pay back most of her loan to qualify for the partial debt forgiveness. But earlier this month, she said, she was told by her bank HSBC that she wasn't eligible for the money she received more than three years ago.

"I was absolutely floored. I had never had any indication prior to that time, since the receipt of the CEBA funds, that I was ineligible," she told CBC News.

Peng Skinner said she's now being told she's expected to repay the loan in full by Dec. 31.

"I feel extremely disappointed and very, very aggrieved. I just think it's both unprofessional and unethical," she said.

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Nearly 900,000 businesses were approved for CEBA loans. But more than 50,000 of those recipients were later deemed ineligible for the loans, according to a government response to a House of Commons order paper question.

Businesses should have received two notifications from their bank if they were deemed ineligible after the CEBA program closed in 2021, said a spokesperson for Finance Minister Chrystia Freeland's office.

HSBC told CBC News that it couldn't comment on specific cases due to privacy reasons. The bank said its clients were told if their CEBA status was rejected, or were asked to provide more information if their eligibility was in question.

Peng Skinner said she received no warning prior to December that her eligibility status had changed.

"I'm doing my utmost to reach out and to find means and ways to get some kind of understanding as to why I would have been disqualified," she said.

Dan Kelly, president and CEO of the Canadian Federation of Independent Business (CFIB), said Peng Skinner might not be alone in her plight.

Kelly said CFIB has heard from dozens of businesses in recent weeks reporting that their eligibility is now being questioned.

"It's surprising that ... on the eve of the forgivable deadline, that we're hearing from these businesses who sincerely report that this is news to them," he said.

Kelly said ineligible businesses should have been notified by now. He said he suspects something went wrong with those notifications.

"We've had such a volume of these calls that it suggests that something went wrong in the communications," he said.

Asked if the government could re-examine the applications of businesses deemed ineligible for CERB loans they received, Freeland's spokesperson said a remediation process was established to allow businesses to fix their applications if they were deemed ineligible after the fact.

The spokesperson said those ineligible businesses that now have to repay the loans will face no penalty.

"The flexibility that we are providing is significant support for small businesses who might still be struggling to make ends meet," the spokesperson said in an email.

But Peng Skinner said the way she was told at the last moment to pay back the money isn't fair.

"I'm scared and I'm dumbfounded, if you really want to know the truth," she said.