Let’s Just Forgive CEBA Loans

The Saturday Huddle is a weekly column that features opinion, analysis, and reflections on Huddle stories, podcasts, and business news in the region. Derek Montague is a Huddle reporter based in Halifax.

The federal government is facing an obvious decision on what to do about the embattled CEBA loan program. Why they have yet to make a move on it is perplexing, as it’s clear there’s only one path forward.

Business has not returned to normal. Life has not returned to normal. There is nothing about 2023 that resembles the nostalgic-filled days of 2019. Anyone who, three years ago, predicted a “return to normal” once the pandemic ended turned out to be a failed psychologist, an amateur philosopher, and an even worse: Nostradamus.

Nothing is the same, especially for small businesses. While major outlets like Walmart and Amazon will always have customers thanks to online shopping, it’s not so easy for smaller retailers.

Prior to the pandemic, restaurants and retail shops relied on good-old-fashioned foot traffic. Now, they are living in a world where people are more comfortable ordering food through delivery apps and buying their clothes and gifts online.

To make the future of small businesses even more uncertain, the federal government has yet to budge on its CEBA repayment program that is doomed to fail. Businesses received as much as $60,000 through these loans to stay afloat during the pandemic. Now, the government wants those loans repaid by the end of 2023. Businesses that succeed in doing this can get up to $20,000 forgiven, but those who don’t will start seeing those loans collect interest.

The numbers show that it is illogical to expect small businesses to pay it back a few months from now. According to the Canadian Federation of Independent Businesses, 72 per cent of the businesses say they need an extension of either one or two years. Based on the struggling businesses I’ve heard from, such a short extension may be optimistic; a multi-year plan is more realistic.

And it’s clear that these CEBA loans are weighing heavy on the minds of small business owners. More than 75 per cent claim that a CEBA repayment extension is key to their survival.

CFIB is reporting numbers that also reinforce how unrealistic the government’s timeline is for repayment. Only 13 per cent of small businesses, they say, have been able to fully repay the feds. Meanwhile, roughly half of businesses are reporting a return to “normal” sales. There is no way the public will see a return of the $50 billion it gave out in CEBA loans (minus the forgiveness) by December of 2023.

In my interviews with small business owners, the subject of CEBA loans is common. I have yet to speak to one Halifax small businessperson who has even come close to repaying the loan.

Mark Giffin is the owner of The Coastal Café. He is worried about bankruptcy for two reasons. The city of Halifax is expropriating his business to make way for more bus lanes, and he still has pandemic debt to pay, including more than $30,000 in CEBA loans.

“I don’t know how I’ve managed to stay open,” said Giffin. “I haven’t been able to hire a cook so I’ve been doing everything by myself for the past couple years. And that’s it’s been tiring and exhausting.”

Earlier this year, I wrote about how the feds deemed 50,000 businesses ineligible for CEBA loans, years after already receiving the money. Many of them weren’t people caught cheating the system — they were ineligible based on technicalities. Those who were (belatedly) disqualified were told to pay up immediately. Why the feds continue to harm small businesses at their most vulnerable is mystifying.

After we published that story, I received a sad letter from a business owner. This is what she said:

“I am one of the small businesses affected. I am currently trying to find out if the repayment terms for CEBA are the same for ‘ineligible’ businesses (i.e.. can I pay it back over 2 years with interest) as for the ‘eligible’ ones? Or am I required to pay back the entire amount as of December 2023?

“I have called and emailed the bank as well as the CEBA hotline, the CRA, and CFIB, and no one knows the answer to my question.

“As a business owner who lost 90-100 per cent of my business due to Covid lockdowns, (and then lost my business altogether after a second winter of Toronto lockdowns) I was eligible for this loan and I’m assuming that I made an error with the paperwork, which is why I was deemed ineligible. (It’s definitely likely I did since I was bawling my eyes out while I applied for it, afraid I wouldn’t be able to make rent for the first time in ten years).”

The businesswoman said she also wrote an email to her MP’s office with a link to the Huddle article attached as an explainer. I haven’t heard yet if better fortune has come her way in the following months since.

To me, it seems inevitable that the feds will have to extend the repayment scheme. We can’t have small businesses on the brink. Also, the various business groups, such as CFIB, are being very reasonable in their asks. They want an extension.

I would argue, given the amount of uncertainty facing small businesses, that we should go way beyond that.

As a taxpayer, I would be 100 per cent in favour of forgiving all the CEBA loans for small businesses. Yes, you read that right. It would not be charity; it would be an investment. Right now, small businesses are coming to terms with the fact that their business models will have to change. To borrow a hated term from 2020, they need to pivot (again).

This will require time and money. If they didn’t have to repay $60,000 to the government, that money can be used for much needed investment for the new realities of doing business in the 2020s.

And the government has already set a precedent for what it considers a fair investment in business. Recently, the feds offered one foreign car company $13 billion to set up a battery plant in Canada. That’s one, single company.

Certainly, it is an even better investment to subsidize $50 billion spread out over 900,000 businesses. If they’re not willing to make this investment, they can at least do the humane thing and give businesses the time they need to pay back the loans without the threat of going under.