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Industry groups are calling on Ottawa to delay pandemic loan repayments
Published on January 9th, 2024 • Last updated 1 day ago • 3 minutes reading time
According to CFIB, one in five restaurants in Canada are at risk of not surviving. Photo by SAUL LOEB/AFP via Getty Images
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The restaurant industry could be decimated by a wave of closures if the federal government does not extend the Jan. 18 deadline for repaying loans under the Canada Emergency Business Account program, two industry groups warn.
Restaurants Canada, a nonprofit that advocates for the restaurant industry, said Jan. 8 that the looming deadline could prove disastrous for the sector, which is reeling under the burden of debt incurred during the pandemic and other economic factors, which are beyond his control.
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“Immediate action is essential to prevent further closures and ensure the long-term survival of this critical sector, which contributes significantly to the country’s economy,” the association said in a press release.
We do not ask for alms; We ask for more time
Restaurants Canada
The call was taken up by the Canadian Federation of Independent Business (CFIB), which advocates for more than 97,000 small businesses.
Nearly a quarter of those who received loans through the Canada Emergency Business Account (CEBA) are likely to miss the repayment deadline, according to a CFIB survey.
If small businesses do not repay the loan on time or have not agreed to a refinancing extension with their bank, they lose the chance to have up to $20,000 of the loan forgiven. In addition, interest accrues on the remaining principal amount.
The federal government has stuck with the original CEBA loan repayment deadline of January 18, 2024, despite continued appeals from businesses for an extension.
CFIB chief executive Dan Kelly said the government's hasty lending during the pandemic had led to ongoing confusion among small business owners.
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“I think early in the process these things were put together super quickly because it was pandemic support. “The government wanted to provide money to keep businesses afloat in the early days of the pandemic, so it’s no surprise that it tightened some rules over time,” Kelly said.
However, around 50,000 of the 900,000 borrowers were declared ineligible and Kelly said the government had been “terrible in providing information to companies and making many very last minute decisions”.
“In December 2023, numerous companies discovered through a bank letter that they were never eligible for the forgivable portion of their loan and now had to repay the loan in full within a shorter period of time,” he said. “The sad thing is that the company spent the money regardless of whether it was eligible or not. What are you going to do?”
Even for the 40,000 eligible CEBA loan holders, meeting the deadline remains a challenge.
“We have called for a one-year extension to the January 18 deadline, but unfortunately the government has refused to do this,” Kelly said.
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According to Kelly, one in five restaurants in Canada are at risk of not surviving.
A survey by Restaurants Canada, meanwhile, found that 53 per cent of restaurants are currently operating at a loss or barely breaking even, a significant increase from just 10 per cent before the pandemic.
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90% of small businesses have yet to repay COVID loans
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CFIB says rising costs threaten small business recovery
Four major tax increases planned for early 2024 will increase the financial burden on small businesses.
Employment Insurance (EI) and Canada Pension Plan (CPP) premiums increased on January 1st. Payroll taxes for employees will increase by about $348 per employee and for employers by about $366 per employee in 2024. Employers could pay up to $5,524 per employee for the CPP and EI changes, excluding other possible payroll taxes.
On April 1, the carbon tax will also rise from $65 per tonne to $80, and the alcohol tax will adjust to inflation, about 3.5 percent, unless the government decides otherwise.
The CFIB has advocated for the tax increases to be suspended.
“The recovery in the restaurant industry has been extremely slow due to multiple factors beyond restaurateurs' control, including record-high inflation, rising food prices and labor shortages,” Restaurants Canada said in its press release. “We are not asking for a handout; We ask for more time.”
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