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Posthaste: Thousands upon thousands of small businesses at risk of closing for good as CEBA loans come due

The Vancouver Sun sent this email to their subscribers on June 7, 2023.

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CFIB says 250,000 businesses at risk of closure if loan repayment deadline not extended View this email in your browser Image Sponsored by: DCM SURPRISINGLY SIMPLE Good morning,  Small businesses in Canada are running out of time to pay back government-backed pandemic-era loans, and failure to do so by the deadline could force nearly a quarter of a million to shut their doors for good, warns the Canadian Federation of Independent Business (CFIB). Close to 250,000, or 19 per cent of small businesses, face closure if they can't get an extension on paying back Canada Emergency Business Account (CEBA) loans, CFIB said in a new report released June 7. The repayment deadline is set for Dec. 31, and business owners who miss will lose out on having a portion of their debt forgiven. The price of missing the end-of-year limit is steep, with entrepreneurs facing an extra bill of up to $20,000 on top of what they already owe, while also facing a five-per-cent interest rate on their balance. That added burden could have major implications for the sector because the vast majority, or 89 per cent, of small businesses took out CEBA loans during the pandemic to help them stay afloat, CFIB said. Of those, 68 per cent borrowed between $40,001 and $60,000, while 21 per cent took out $40,000 loans. Yet, months before the December deadline, only 10 per cent of business owners have been able to pay back what they owe. CFIB estimates 43 per cent of businesses that took out the loans will miss the repayment deadline. Those with four employees or less are most likely to fail to pay on time, as are enterprises in the arts, recreation and information sectors, as well as in hospitality and social services. But even those owners that do manage to repay their CEBA balance by the deadline say it will cause them hardship. Of the 47 per cent who plan to pay off their loans by Dec. 31, close to half say it will be a struggle. Another 59 per cent think having to come up with the cash will prevent them from getting their businesses back to pre-pandemic revenues — a feat that has proven difficult for many. Indeed, half of small businesses still haven't bounced back from COVID-19, with revenues stuck below their pre-pandemic normal. Many owners are also carrying elevated loads of debt, adding to their burden. For 40 per cent, those debt levels are considered "heavy" or "high," and 28 per cent are unsure they'll be able to pay it all back. "The message from small businesses is loud and clear," Dan Kelly, CFIB president said in a news release. "They need more time to repay their CEBA loan." Close to three quarters of small business owners want the CEBA deadline to be pushed back, with 30 per cent in favour of a one-year deferral, and 42 per cent hoping for a two-year deferral, the report said. Such a measure would provide some much needed relief, with 65 per cent of owners believing it would give them a fighting chance of surviving a tough economic climate. As it is, the loan has become an added source of worry for small business owners now dealing with inflation, high interest rates and the threat of a recession, not to mention labour shortages. "The CEBA loan, which once served as a pivotal economic lifeline during the nearly two years of COVID restrictions, is now a source of immense stress and anxiety for small businesses," Corinne Pohlmann, senior vice president, National Affairs, at CFIB said. Further, she said the impact of those closures could spread beyond individual owners and hit the broader economy. The timing couldn't be worse, as many economists expect Canada to enter a mild recession in the latter half of the year. The CFIB is calling on the federal government to push the deadline for repayment of the loans to 2025, or at least 2024. They would also like Ottawa to increase debt forgiveness to at least 50 per cent of the loans. Further, they are asking the government to create an appeal process for around 50,000 businesses that received the loans but have since been deemed ineligible. "Ottawa must give (small businesses) more time," Pohlmann said, "or we will see more 'permanently closed' signs in the coming months." Was this newsletter forwarded to you? Sign up here to get it delivered to your inbox. LEADING INDICATOR 2023 OFF TO A FIERY START Cumulative area burned in Canada, millions of hectares T HHHl TITTTTTTTTITITTTTTIT T TTTTTTTTTITITIT April May June July Aug. Sept. Oct. SOURCE: CANADIAN WILDLAND FIRE INFORMATION SYSTEM GIGI SUHANIC FINANCIAL POST Wildfire smoke from Quebec is spilling down across Canada and into the United States, causing hazy skies and spurring air quality warnings from Ottawa, to Montreal, to Toronto and even New York City, which received the title of most polluted major city in the world on the night of June 6. Canada is on track to see its worst-ever wildfire season in recorded history if the rate of land burned continues at the same pace.  The country is experiencing an unprecedented amount of fire activity for this early in the season, scorching approximately 3.3 million hectares (8.2 million acres) — almost double the area of Lake Ontario — so far this year, according to Canadian government officials. That’s 13 times more than the average in the past decade for the same period. Some 413 active fires are burning across the country, from British Columbia to Nova Scotia, prompting 26,000 Canadians to evacuate their homes. The most out-of-control blazes are raging in Quebec. Officials blame climate change for increasing the frequency and intensity of wildfires. The federal government is projecting the potential for higher-than-normal fire activity across most of the country through to August. Warm and dry conditions will increase the risk in June, particularly for the area stretching from B.C. to western Quebec.  — Bloomberg FP MUST READS Mortgage growth is slowing, but Canada's big banks aren't worried yet Higher interest rates will keep mortgage loan growth subdued for the rest of the year Why WestJet may be forced to chart a new path for Swoop in wake of deal with pilots Integration of two airlines could be the end of the ultra low-cost model, say experts Ontario makes it easier for immigrants to get jobs, but hurdles remain Other provinces urged to follow suit on Ontario's move to ease licensing requirements Want workers back in the office? A free lunch isn't going to cut it, but here's what might Employers need to do 3 things: tackle noisy workspaces and painful commutes while also mandating in-office days QUOTE OF THE DAY "WE THINK THE BANK OF CANADA IS IN FOR AT LEAST ONE MORE HIKE ... IT IS GOING TO MAKE EVERYTHING MORE DIFFICULT. AND THAT'S ALSO WHY THE HOUSING MARKET WILL STRUGGLE TO TAKE OFF FROM HERE." —  Jimmy Jean, chief economist at Desjardins Group, on the outlook for the housing market in the months to come. Jean spoke with the Financial Post's Gabriel Friedman about the "ticking time bomb" of debt stemming from the rise of the variable-rate, fixed-payment mortgage amid higher interest rates, and addressed the issue of housing affordability. Listen to their conversation on this week's Down to Business podcast. No more: Inefficiencies Overspending - S preadSheetS DCM i optichani MARKET SIGNALS SPTSX SP 500 Futures WTI Futures Per Barrel Gold Spot Per Ounce U.S. Dollar Index A Canadian DollarU.S. Dollar Source: Bloomberg. The percentage change is daily 2 20,055.60 4,291.75 US$72.58 US$1,978.60 103.92 74.76 0.62% 0.05% 1.17% 0.15% 0.19% 0.18% BREAKING TODAY * The Bank of Canada announces its latest interest rate decision this morning. One out of five economists surveyed by Bloomberg expect the central bank to raise rates by 25 basis points to 4.75 per cent, but other think policymakers will wait until next month to hike. Either way, Canadians might want to prepare themselves for interest rates to go up again. "The conditions to pause, which were laid out earlier this year, have now been violated," said fixed-income strategists from the Canadian Imperial Bank of Commerce. The Financial Post will have full coverage of the rate announcement, starting when the decision drops at 10 a.m. * The Greater Vancouver Board of Trade hosts Victor Montagliani, FIFA vice-president and Concacaf president, for a discussion about the economic opportunities related to the World Cup and the impact of the games on the B.C. region. *   * Today's data: Canadian merchandise trade balance, labour productivity; U.S. goods and services trade balance * Earnings: Dollarama Inc., Transcontinental Inc. PERSONAL FINANCE School may be out soon, but investing veteran Peter Hodson has a few lessons left for us. From chasing hot investment trends to analyzing too many things, here are a handful of popular mistakes to correct before sitting back with our Mai Tais. Today’s Posthaste was written by Victoria Wells, @vwells80, with additional reporting from The Canadian Press, Thomson Reuters and Bloomberg. Have a story idea, pitch, embargoed report, or a suggestion for this newsletter? Email us at [email protected], or hit reply to send us a note. Sign up now for more of FP’s free, in-depth newsletters Download the Financial Post App: LA e e R App Store ANDROID APP ON Google play Connect with us on: © 2023 Postmedia Network Inc. All rights reserved. Unauthorized distribution, transmission or republication strictly prohibited. 365 Bloor St East, Toronto, ON, M4W 3L4 You received this email because you are subscribed to Financial Post Newsletter, registered as [email protected] • • • Contact us • Digital Ad Registry © 2023 Postmedia Network Inc. All rights reserved.
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