As the March 28 deadline for refinancing Canada Emergency Business Account (CEBA) loans approaches, the economic challenges faced by small businesses in Canada remain. The aftermath of the January 18, 2024, deadline to pay off CEBA loans (with forgiveness) has exposed a landscape of confusion, frustration and uncertainty among business owners grappling with the intricate process of refinancing their loans.
The lack of cohesive communication between the host lenders and their CEBA borrowers has become a significant challenge for these small enterprises, exacerbated by the vague guidelines provided by the government to the host lenders regarding guidelines around the refinancing qualifications. Rules have been applied differently by institution, and as a result, the experiences have been inconsistent across borrowers. With business livelihoods at stake, it demands urgent clarity to prevent further economic fallout.
A recent Statistics Canada report revealed a concerning 57.2-per-cent increase in business insolvencies in December 2023, compared to the previous year, marks the largest surge in 36 years of recorded data. In British Columbia alone, 122,890 businesses were approved for CEBA loans worth more than $6.6 billion, but 25 per cent of those did not meet the repayment deadline. A combination of a “post-COVID malaise,” rising interest rates, inflation and an economic growth rate of less than one per cent all adds up to problems with business sustainability, and most small businesses do not operate with a lot of cushion. For these reasons, many, including the Canadian Federation of Independent Businesses (CFIB), lobbied the federal government for further relief in the form of delayed dates of repayment. However, the government chose to hold in its deferment considerations and instead added the somewhat less clear January 18 and March 28 thresholds to help with repayment. The pending March 28 deadline for CEBA refinancing means a window does still exist to benefit from the government’s “forgiveness program.”
Right now, since the government left it to the host lenders' interpretation of what constituted an “application for refinancing,” many business owners remain in a state of precariousness. A quick review of a recent Reddit thread underscores the frustration and desperation faced by small businesses. Approved loans are being reverted, pushing some businesses toward liquidation in a desperate attempt to meet their financial obligations. What many may not even know is that if a business faced rejection for refinancing from their host lender, or failed to “formally” apply for refinancing before January 18, they can still qualify for the extension to March 28. While these borrowers will now be carrying a five-per-cent interest cost post January 18 on their loan, what is important is that if they apply for refinancing somewhere else and are funded before March 28, they remain eligible for the partial loan forgiveness.
The repercussions of this confusion extend beyond individual businesses and are reverberating throughout the Canadian economy. Small businesses make up 97.9 per cent of Canadian businesses and are the backbone of our economy, significantly contributing to job creation and economic growth. The potential consequences of their financial struggles reach far and wide, affecting not only owners but also employees, suppliers and communities dependent on their success.
One highlight to this bureaucratic maze has been the role played by technology-backed private financiers. Fintech lenders have played an increasingly valuable role in bridging the gap between government programs and businesses, providing a considerable solution to small businesses during this confusing, and economically challenging time. Often more agile and responsive than larger financial institutions, and with a wider credit span of acceptance, they have shown the potential to provide much-needed credit support to struggling businesses. The challenge lies in ensuring the small business marketplace is aware of these available resources and how to access these services, particularly with the March 28 deadline approaching.
Emphasizing the role of fintech lenders in offering guidance, financial solutions and personalized assistance during the refinancing process becomes even more critical in this context. By exploring all available expertise and support, small businesses can be empowered with the knowledge they need to make informed decisions about their financial future.
As we approach the March deadline, clear and effective communication, coupled with practical solutions and support, is essential to prevent further economic fallout. Small businesses are the lifeblood of our economy, and their survival is crucial for the well-being of our nation. Hopefully their search for support leads many of them to fintech lenders so they can benefit from CEBA loan forgiveness and remain a resilient and thriving sector in Canada.
David Gens is the founder and CEO of Merchant Growth.
