Small businesses face ‘massive fallout’ as CEBA loan deadline looms

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This article was published 30/10/2023 (750 days ago), so information in it may no longer be current.

The Manitoba government is calling on Ottawa to extend deadlines for federal loan repayments after business insolvencies in the province in August jumped 40 per cent since the start of the year.

Premier Wab Kinew joined fellow provincial and territorial leaders to ask Ottawa to give small businesses until Dec. 31, 2024, to pay back Canada Emergency Business Account (CEBA) loans currently due Jan. 18, in order for a portion of it to be forgiven.

“The same loan that was once a lifeline during the (COVID-19) pandemic is now threatening to sink the small businesses that are only just getting by,” says the Oct. 20 letter to Prime Minister Justin Trudeau and signed by all premiers.

“Nobody seems to realize the massive fallout from this,” said Carol Yaschuk, owner of Ce Soir Lingerie, who is staring down a deadline to pay back $40,000 in the coming weeks.

The Winnipeg shop is one of 898,271 Canadian small businesses that received loans of up to $60,000 to help them survive during pandemic shutdowns and restrictions, with $20,000 forgivable if its repaid by the deadline.

Yaschuk said she’s scraping together all her working capital to pay pack $40,000 on time, otherwise the entire $60,000 she borrowed through the CIBC is rolled over into a loan at around five per cent interest.

Yaschuk, who started her business in 2001, said there’s been ups and downs and it would be doing just fine now if not for the pandemic shutdown that forced her to temporarily close the doors and the impacts that followed.

“I’ve borrowed so much money since the beginning of COVID, it’s ridiculous,” she said.

Before the federal government rolled out CEBA, she needed to borrow through the bank to survive. “I still have these loans and can’t get rid of them.”

With an economic slowdown, rising costs and higher interest rates, Yaschuk said she is struggling but knows she’s not alone.

Her shop of eight employees is one of nearly 250,000 small- and medium-sized Canadian businesses that face potentially going bankrupt in the next year, with between one and 500 job losses per business, industry reports say.

In Manitoba, 19 per cent of small businesses surveyed said they are actively considering either bankruptcy or closing their doors unless further changes were made to the CEBA repayment deadline, said Brianna Solberg, Prairie region provincial affairs director for the Canadian Federation of Independent Business.

“For a lot of us, it may appear the pandemic is over, but the repercussions are long-lasting and small businesses have a long way to go to recover,” said Solberg from Regina.

“Only about half of them are back to their normal sales levels. Many of them have found customers are slow to return and are spending less on average. That’s just a reflection that inflation is squeezing everybody,” she said of the survey of membership.

“A lot of them continue to deal with pandemic-related debt and stress.”

In August, the latest numbers from the national Office of the Superintendent of Bankruptcy showed a 40 per cent increase in business insolvencies since the start of the year in Manitoba. Eight declared insolvency in August, reaching a total of 28 for the year thus far.

There were 34 in 2022, and 28 in 2021.

University of Manitoba economics Prof. Gregory Mason said seeing the number of active businesses paints a clearer picture.

Statistics Canada data for the Winnipeg census metropolitan area show strong pre-pandemic growth in the number of active businesses — increasing to 18,000 in December 2019 from 17,500 in March 2016, he said.

After the global pandemic hit in March 2020, the number of active businesses plummets to 16,500 by June 2020. That number climbed steadily to just over 19,000 in December 2022, before tapering off.

“The slowing of the number of businesses is the number to focus on,” Mason said Monday.

“What we’re seeing after the pandemic is a really strong recovery in the number of businesses, and part of it may been CEBA loans and it was fairly easy to get money,” he said. “What’s biting now is interest rates — regardless of the CEBA loan forgiveness.”

Meantime, Yaschuk is calling for total forgiveness of the CEBA loans, saying her business (which she said provides an essential bra service) was forced to close at the same time big-box stores were allowed to open and rake in record profits.

“If the federal government needs the money back to that degree, they should be exponentially taxing those companies that were able to be to open during the COVID lockdown while we were so penalized — all of us.”

Small independent businesses in Manitoba that experienced “some pretty severe restrictions compared to multinational corporations” were at an “extreme disadvantage,” agreed Solberg.

The CFIB has campaigned for people to shop local, saying 66 cents of every dollar stays within the community, compared to just 11 cents spent shopping at a multinational business.

She applauded Kinew and the others for calling on Ottawa to postpone the CEBA repayment deadline to the end of next year. “It was great to see all premiers sign the letter.”

carol.sanders@freepress.mb.ca