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COVID loan deadline threatens business survival, North Van Chamber warns

Now is the time to show small businesses some love and shop local, the chamber says
A North Vancouver business owner steps outside for a discussion with a customer on Lonsdale Avenue during the early days of social distancing, March 2020. Federal loans meant to keep businesses afloat early in the pandemic are now coming due. | Paul McGrath / North Shore News files

If there’s a particular place on the North Shore where you like to get a sandwich and an Americano, you might want to go show them some love.

The deadline for business owners to repay their COVID-era federal business loans without penalty comes on Thursday, and there are likely many businesses that won’t be able to do it, the North Vancouver Chamber is warning.

In the spring of 2020, the federal government offered the Canada Emergency Business Account loan – up to $60,000, interest free – to help entrepreneurs last through lockdowns. Those who pay it off by the deadline are entitled to have up to $20,000 forgiven.

Starting on Jan. 18, businesses will face interest rates of five per cent monthly and lose their eligibility for any portion of debt to be forgiven. They’ll then have three years to pay off the loans in full.

Already, the feds have extended the deadline three times, but the North Van Chamber has been among many groups urging the Department of Finance to give businesses more time.

“In many cases that we’ve heard from people who would like that extension, whether their business survives or not is at stake and that’s probably the saddest outcome of this. There are some businesses that may go under because they’re not able to repay the loan,” said Patrick Stafford-Smith, chamber CEO. “That’s got to be a very, very stressful situation for them right now.”

Stafford-Smith said the chamber doesn’t have any data on how many local businesses took a CEBA loan or how many haven’t been able to pay it back. But the chamber did carry out a survey of its members in the summer of 2023, which found some stark numbers. Of those who responded, 95 per cent said the CEBA loan helped them stay afloat during COVID. But 72 per cent said they will not be able to pay back the loan by the deadline. Having to pay back the loans in full would either significantly impact the viability of 68 per cent the businesses or force them to close, the survey found.

The Canadian Federation of Independent Business estimates 22 per cent of small businesses in B.C. won’t meet the deadline.

Anecdotally, Stafford-Smith said it appears the majority of the local business owners he’s spoken to have been able to pay back the CEBA loan or refinance. But, since the worst of the pandemic passed, businesses have faced unprecedented inflation, supply chain issues, rising interest rates and an uncertain economy, Stafford-Smith noted.

“Some [businesses] have recovered quicker than others, and I think it is a very personal, individual situation,” he said, noting that many business owners don’t feel comfortable speaking publicly about being trapped in debt. “I think we do need to have some empathy for those who had a viable business and now are struggling.”

Ben Coli, co-founder of Dageraad Brewing in Burnaby, took to social media to highlight the unfairness of the CEBA program in retrospect.

“I’m so angry. Four years ago, the government forbade 1,000s of small businesses to operate and they offered us loans,” he wrote. “Banks could still charge interest, landlords could still charge rent, but we couldn’t operate and they offered us debt. Now many entrepreneurs face bankruptcy.”

Stafford-Smith said he doesn’t judge the CEBA program quite so harshly, given how quickly it was rolled out.

“I think any business owner would be a fool not to take those kinds of loans because of the uncertainty at the time, and I don’t think anybody can predict the future,” he said. “I just wish there were more options for some of the businesses looking to repay.”

The Department of Finance did not provide any stats on how many local business owners would be affected by the coming deadline, but a statement from Katherine Cuplinskas, press secretary for the finance minister, did highlight the flexibility CEBA has provided.

“The bottom line is that, if you are a small business owner and do not currently have the funds to repay your CEBA loan, you now have three years to repay it in full. The CEBA program, which delivered over $49 billion to nearly 900,000 small businesses and non-profits across the country, including in North Vancouver, was an essential part of the federal government’s swift response to the COVID-19 pandemic. The additional flexibility that we announced is significant support for small businesses who might still be struggling to make ends meet.”

For those who want to help their local proprietors, Stafford-Smith has some advice.

“Shop local and buy from our local vendors and hopefully that purchase you made, whether it’s food or whether it’s a product or a service, will help somebody and their business be more viable.”

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