The deadline to repay long-delayed federal pandemic loans finally arrived Thursday, and many people are scrambling to sign refinancing deals to buy time.
Businesses had until Thursday to repay their loans through the Canada Emergency Business Account (CEBA) to receive partial forgiveness.
After that date, the loan will be converted to a three-year loan and the debt will accrue interest at 5% per year.
However, business owners who have entered into refinancing agreements with financial institutions must repay the outstanding amount by the end of March, and up to one-third of the loan amount will be forgiven.
CEOs of fintech companies said small businesses are scrambling to meet Thursday’s deadline to repay federal pandemic loans, with thousands applying for refinancing options offered by their companies. He said he is doing so.
David Gens, founder and CEO of Merchant Growth, told BNN Bloomberg that there is a “crazy exponential trend” among businesses looking to repay loans they took out in 2020 or 2021. He said there was a “competitive competition”.
“In many cases, people actually (in many cases) left it until the last moment,” Gens said in a television interview Wednesday before the deadline.
“Hurry and apply now”: CFIB
Gens said many people waited until 11 o’clock in hopes of a possible re-extension. But lobbying efforts to delay the date ultimately failed, with Prime Minister Justin Trudeau pouring cold water on the idea on Wednesday.
As a result, some holdouts were struggling until the last day or hour to meet the deadline, Gens said.
Businesses that fail to meet the deadline will lose the forgiven portion of their loans and will begin accruing interest until December 31, 2026.
Those who choose the option to refinance their loans with a financial institution have until March 28 to set up new terms and still be eligible to receive the forgiven portion of their loans.
Dan Kelly, president and CEO of the Canadian Federation of Independent Business (CFIB), encouraged business owners Thursday to pursue refinancing options.
“If you hurry up and apply today, you will need to disburse your loan by March 28th while still keeping the forgiveness portion of your loan,” he said in a post on X (formerly Twitter).
“Even if it is ultimately rejected, we will still get an extension until March 28,” he said, adding that 5% interest will be charged from January 19.
Kelly said small business owners should document the process and apply for a loan from the financial institution where the initial CEBA loan was made.
Today (January 18) is the last day small businesses can apply for bank loans for repayment. #Seva loan. If you apply now, you have until March 28th to take out your loan while protecting the forgivable portion of your loan. Even if you are ultimately rejected, you…
— Dan Kelly (@CFIB) January 18, 2024
Kelly said in an interview with BNN Bloomberg on Thursday that failure to meet the deadline would have a significant impact on businesses.
“If you miss today’s deadline or don’t apply for your loan by today’s deadline, you’ll be owed the full $60,000 tomorrow,” he said.
“Their debt increases by 50 percent. They went from having $40,000 in debt to $60,000 in debt.”
Kelly emphasized that the outlook for small and medium-sized enterprises, particularly those whose debt has increased due to the CEBA deadline, is “bleak.”
He said only half of the country’s small businesses have seen their sales return to pre-pandemic levels, and all small businesses are “experiencing significant cost increases across all lines of their budgets.” .
Merchant Growth is one of the lenders offering refinancing, and Gens said applications are piling up as the deadline approaches.
Through Thursday, Merchant Growth received thousands of loan applications every day for $40,000 loans, and a “significant number” of applications for $30,000 loans, Jens said. It is said that there was also
Jens said most businesses take out CEBA loans for $40,000 or $60,000, and if they repay up to $40,000 now, they can get $20,000 forgiven.
Jens said most businesses take out CEBA loans for $40,000 or $60,000, and if they repay up to $40,000 now, they can get $20,000 forgiven.
economic impact
Economists at Desjardins examined the economic impact of this deadline in a report released Thursday, finding that while the overall economic impact will be minimal, repayments of CEBA loans will weigh on real GDP and employment. I predicted that it would be.
According to the report, “more than half of Canadian businesses” have received loans under the program. Approximately 900,000 Canadian businesses were approved for CEBA financing, and 575,000 of those companies were granted extensions, totaling approximately $49.2 billion in financing.
Small and medium-sized enterprises accounted for the largest proportion of companies that received loans. The lodging and food services sectors, which have been particularly hard hit by pandemic closures, also accounted for the bulk of the loans, according to the report.
Economists said real gross domestic product (GDP) and employment were higher than they should have been because CEBA loans supported businesses during the pandemic.
Going forward, the report’s authors predict that CEBA loan repayments will weigh on real GDP and employment.
“We estimate that employment levels would be nearly 85,000 lower at the end of 2026 compared to a scenario in which CEBA loans are fully forgiven,” the report said.
“But inflation and interest rates will also come down, providing relatively affordable relief for all Canadians.”
Economists at Desjardins said the economic impact of repaying the CEBA loan would be “minimal” in the short term, as “many of the downside risks” to the federal government’s fiscal balance have been deferred until the end of 2026. He said he expected it.
The report also highlighted the possibility that the federal government will extend the repayment deadline in the coming years to reduce the impact on debt and budget deficits at the federal level.
