2024-01-15 10:29:31
The federal government shows no sign that it will again ease the repayment conditions for emergency loans granted to businesses affected by health measures at the height of the pandemic, despite repeated requests from elected officials and groups that defend interests of entrepreneurs.
As an important deadline approaches, some companies are still trying to sort out their options for repaying the government, while others are facing surprises.
Confusion among entrepreneurs
Nearly 900,000 businesses benefited from the Canadian Emergency Business Account (CEBA). Their owners have only three days left – that is to say until January 18 – to repay their loan of a maximum value of $60,000 if they want part of this loan to be forgiven.
These entrepreneurs can also attempt to refinance their loan and repay the government before the end of March to maintain the right to partial forgiveness.
According to the Canadian Federation of Independent Business (CFIB), the federal government was slow to clarify the conditions for repaying CEBA loans whose total value amounts to more than $49 billion. Certain SMEs have thus received contradictory information from Ottawa and their financial institutions in recent weeks.
The first thing we hear is confusion, summarizes Christina Santini, director of national affairs for the CFIB, an organization that represents nearly 100,000 SMEs in the country.
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CFIB’s director of national affairs, Christina Santini, indicates that many entrepreneurs are struggling to understand the different repayment options for emergency loans granted during the pandemic.
Photo: Radio-Canada / Félix Desroches
Surprise after repaying your loan
Ania Jamila is one of those entrepreneurs for whom repaying the CUEC loan causes a lot of headaches.
During the pandemic, the activities of his audiovisual production company were completely shut down. The $40,000 she receives through CUEC allows her to stay afloat and relaunch her business when health measures ease.
We felt supported. We felt supported by the government in a somewhat complicated situation, she explains.
The loan allows him to orchestrate a shift towards film production. After two years of hard work, she signed a few important contracts which gave her a little leeway.
With the cash, she repaid last December the $30,000 she believed she owed the government.
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The CUEC program loan allowed Ania Jamila to breathe new life into her audiovisual production business.
Photo : Radio-Canada / Yanick Lepage
I was very proud to repay [le prêt] before maturity [du 18 janvier]. Paying it off at the beginning of December, I felt liberated. I felt accomplished, she says with emotion.
These feelings gave way to incomprehension when at the beginning of January, she read an email from her bank that had escaped her attention a few weeks earlier.
She is informed that she has been deemed ineligible for the government program. Her financial institution is asking her before December 31 for the $10,000 that she thought was exempt. Her bank explains to her that it is not responsible for the decision and redirects her to a call center set up by Ottawa.
An automated message then tells them that decisions regarding loan eligibility are final and that there is no possible appeal.
I feel duped. I feel stunned. I do not understand what is happening, […] while I did things in order in my opinion, confides Ms. Jamila.
To this day, she still does not know why she was not deemed eligible for the program. She nevertheless intends to repay the $10,000 as soon as possible in order to turn the page.
I can access this amount, but I know that not everyone will be able to access it. This is what saddens me the most, laments the entrepreneur.
According to the federal government, 50,000 businesses that obtained a CEBA loan were subsequently deemed ineligible for the program.
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Despite pressure from several groups, Deputy Prime Minister and Minister of Finance Chrystia Freeland has given no sign that she will delay repayment of CEBA loans. (Archive photo)
Photo : The Canadian Press / Justin Tang
By email, a press secretary for Deputy Prime Minister and Minister of Finance, Chrystia Freeland, indicates that in 2021, small business owners with an incomplete or ineligible application were contacted several times by their financial institutions.
Ms. Jamila claims to have only received emails at the time informing her that her request to increase her CUEC loan by $20,000 had been refused.
A massacre to be expected?
In addition to the confusion surrounding reimbursement conditions, CFIB reports a lot of anxiety among its members.
It’s really not obvious to many [d’entrepreneurs] to repay these amounts in the current economic context, explains Ms. Santini.
According to the CFIB, a third of its members do not think they will be able to refinance or repay their loan before January 18.
They will have to start paying 5% annual interest on the amounts borrowed.
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According to the CFIB, a third of its members have already repaid the CEBA loan and another third believe they will be able to refinance it to benefit from the partial exemption. (Archive photo)
Photo: Radio-Canada / Jason Empson
These entrepreneurs are therefore forced to review their budget to find additional money in order to pay interest and repay their loan before the final deadline in December 2026.
Many of them will have to close shop, warns Ms. Santini.
For several months, the CFIB has been insisting that 250,000 businesses, or 19% of Canadian SMEs, are at risk of going bankrupt due to Ottawa’s refusal to postpone the repayment date for CEBA loans.
Restaurants Canada estimates that one in five restaurateurs who have benefited from the program are on the verge of closing one or more of their establishments, or more than 4,000 independent restaurants.
Given these alarming figures, many chambers of commerce, the 13 provincial and territorial premiers, the NDP and the Bloc Québécois, in particular, have joined the fight to encourage the Trudeau government to once again postpone loan repayment. So far, their efforts have been in vain.
A legitimate decision, according to a political scientist
Despite the difficulties it may generate for certain SMEs, the federal government’s decision not to bend in the face of pressure from these groups is justified, according to Geneviève Tellier, professor of political studies at the University of Ottawa.
The question that arises is: is the government not helping businesses which ultimately, under normal conditions, would not have survived?, she says.
There will always be companies in difficulty, but our system means that we accept that a good part of these companies disappear because they are not profitable and they no longer meet a need in society, adds the political scientist
Year after year, more than 90,000 businesses cease their activities each year in the country, according to Statistics Canada data collected between 2013 and 2017.
Ms. Tellier also recalls that consumer habits have changed since the pandemic.
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Geneviève Tellier is a professor of political studies at the University of Ottawa. (Archive image)
Photo: Radio-Canada / Rozenn Nicolle
Companies that have managed to make the shift or offer the new product that is in demand will succeed. But should we continue to support a model [d’affaires] which should no longer exist?, she asks.
Déborah Cherenfant, strategist in women’s entrepreneurship, adds that the precariousness of many SMEs is due to a cocktail of factors.
Is it that [le remboursement du CUEC] is the straw that breaks the camel’s back? Maybe, in some cases, she indicates.
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Déborah Cherenfant believes that repaying CEBA loans is one of the many challenges that entrepreneurs must currently face. (Archive image)
Photo : Radio-Canada / Mathieu Arsenault
But I would not say that this is the main factor in this fear that we feel among entrepreneurs, adds Ms. Cherenfant.
In his eyes, inflation, labor shortages in certain sectors, rising borrowing costs and the stagnation of economic activity in the country represent more glaring challenges that are not likely to disappear any time soon. .
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Recurring communication challenges
However, she considers it deplorable that some businesses only recently learned that they were not eligible for the CEBA program, while others are still having difficulty sorting out the different reimbursement conditions.
Such communication challenges are common in programs offered to SMEs, according to Ms. Cherenfant.
One of the points that comes up very often, and not only at the federal level, but also at the provincial and municipal level, is that the administrative part is less clear. There are several steps. Often, we feel like we are facing a labyrinth, she notes.
In this sense, Ms. Jamila, the entrepreneur whose bank is asking her for the money she thought was exempt, maintains that her experience with the CUEC loan made her lose confidence in government programs.
I was promised something that didn’t come to fruition and I have no way of knowing why, she laments.
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