Deadline Looms: Businesses Must Repay CEBA Loans or Incur Interest

As the deadline for repayment of loans issued under the Canada Emergency Business Account (CEBA) program approaches, Canadian businesses are faced with a critical decision. While some are hoping for a last-minute extension, others are urging fellow businesses to accept the reality and repay the loans to avoid accruing interest.

The federal government has made it clear that the deadline for repayment, extended to January 18, will not be postponed further. Businesses that repay their loans by this date stand to have up to $20,000 forgiven, while those who miss the deadline will start incurring interest on their outstanding balances.

More than 885,000 small businesses and not-for-profits in Canada availed themselves of CEBA loans, amounting to over $48 billion.

Prime Minister Justin Trudeau emphasized the importance of moving forward during a luncheon hosted by the Chamber of Commerce of Metropolitan Montreal. He stated that the loan deadline had already been extended twice, and it was time to wind down pandemic-related programs.

While many businesses have called for an extension, others have advocated for full forgiveness of the loans, a stance that isn’t favored by everyone. Thomas Watson, whose company, Guardsman Insurance Services, repaid its CEBA loan by December 31, 2023, expressed frustration with businesses seeking further assistance. He believes it would be unfair to forgive unpaid balances, as it would penalize those who responsibly repaid their loans. Watson acknowledged that different businesses faced varying cost pressures, making blanket forgiveness inappropriate.

Delaying the repayment of government-backed CEBA loans, according to the independent parliamentary budget officer, would cost the federal government $907 million. Financial institutions administering the loans only charged a fee of 0.4 percent of the outstanding balance.

Extending the deadline would not only lead to lost interest payments but also the potential for some loans to become uncollectible if businesses fail. David Gens, CEO of Merchant Growth, a company offering loan refinancing options for CEBA recipients, stressed the importance of timely repayment. He argued that delaying further would not guarantee that businesses would be able to repay, as some might inevitably fail, causing Ottawa to collect less in the long run.

Businesses that cannot repay their loans in full by the deadline have alternative options. They can continue repaying the loan with a 5 percent interest rate per annum starting on January 19, 2024. Alternatively, they can refinance the loan with financial institutions and still receive the loan forgiveness, provided they meet the institutions’ lending criteria. However, this option may result in higher interest rates than the 5 percent imposed by the government.

Despite the various options available, some businesses find themselves in challenging situations due to the CEBA loans. Brittany Megna, owner of BOVJEE Beauty Boutique in Guelph, Ontario, was unable to secure refinancing and cannot meet the January 18 deadline for repayment. This has led her to make significant changes to her business operations, highlighting the financial strain faced by many business owners.

As the clock ticks down to the CEBA deadline, businesses are grappling with financial decisions that will impact their futures.