Tina Hamlin, who runs a home decor company in Vancouver, was initially elated when she heard the federal government will allow small businesses an extra year to repay a loan given to them during the pandemic.

Amid a series of other announcements on the housing crisis and rising food prices, Prime Minister Justin Trudeau on Sept. 14 said the extension on Canada Emergency Business Account (CEBA) loans will provide small businesses with a “bit more runway” to pay them back as dozens of his party’s members applauded the announcement on air.

Thrilled with what she saw on the news, Hamlin decided to go online and dig a little deeper. A few minutes later, her excitement fizzled as she realized the extension ignored a key aspect of the loan: the forgiveness grant.

CEBA extension falls short

CEBA offered interest-free loans of up to $60,000 to small businesses and not-for-profits until June 2021 to help them tackle the economic impacts of the pandemic. In total, $49.2-billion worth of loans to around 900,000 businesses were made under the program.

Repaying this loan by Dec. 31, 2023, would have allowed businesses to receive a loan forgiveness grant of up to $20,000. If companies fail to meet the deadline, however, they will be charged interest of five per cent per year and the full principal would be due Dec. 31, 2025.

Several business groups urged Ottawa to extend the repayment deadline along with access to the forgiveness grant by at least a year because thousands of small businesses warned they have yet to recover financially and are staring at bankruptcy.

The government responded this week by extending the overall loan repayment deadline by a year to Dec. 31, 2026. But the deadline to meet the condition for the forgiveness grant of up to $20,000 was increased by just 18 days, from Dec. 31, 2023, to Jan. 18, 2024.

“This doesn’t seem helpful at all. Really, it’s just lipstick on a pig,” Hamlin said. “They are not really making any difference here. I am very disappointed. It doesn’t seem like they really understand the gravity of the situation. We have been feeling like we have been in a recession for the last six months.”

In addition to rising prices and consumer spending declines, Hamlin’s business, Coast Consignment, which is a source for design props in movies, has been impacted by the ongoing Hollywood labour strikes, which she said has hurt about 25 per cent of her monthly sales. She said she would have to take yet another loan to receive the forgivable grant.

Bankruptcy threat

Losing the forgivable portion of the loan would put nearly 250,000 small businesses in jeopardy, according to a survey conducted earlier this year by the Canadian Federation of Independent Business (CFIB), which has 97,000 members, making it Canada’s largest association of small and medium-sized businesses.

“The extension of the forgivable deadline by a few weeks will be of very little value to the thousands of small business owners who just don’t have money to repay now,” CFIB’s chief executive Dan Kelly said in a statement on Sept. 14.

He added that the additional year to repay the full balance is helpful, but the plan “misses the most central issue.”

Almost 70 per cent of small businesses that accessed the loan have not been able to repay any of it yet, according to an ongoing CFIB study. Only 18 per cent had repaid their loan in full as of September.

Shara Vigeant, who runs a fitness centre in Edmonton, said the extension was “laughable.” She expects several small businesses to go bankrupt under the current plan, and said extending the forgivable deadline would have ensured the government gets some money back rather than nothing.

“It’s almost like a slap in the face,” she said. “What are 18 days going to do for a business that has been struggling for the last two to three years. Eighteen days is nothing. The people who have been making these policies or changing these deadlines have never run a small business before.”

Angela Pollak, chair of a business association in South Algonquin, Ont., a town with a population of about 1,000 people, echoed a similar sentiment and said the extension wouldn’t benefit businesses in rural places where the recovery has been “precarious and incomplete” at best.

“They would have been better off not making any changes at all,” she said.

• Email: nkarim@postmedia.com

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