End of COVID loans: businesses already under pressure

Several companies are already under pressure due to the current economic context. Rising interest rates, labor shortages, cost of goods: added to this is the repayment of emergency loans offered by the federal government during the pandemic.

During the pandemic, businesses were able to take out a $60,000 interest-free loan. By January 18, beneficiaries will have to repay $40,000 of this amount, in order to pay down $20,000 which is forgivable.

There are therefore a little less than two months left for Canadian businesses to repay these emergency loans granted through the Canadian Emergency Business Account (CEBA), but some of them may not be able to repay them at time.

“The government is forcing its hand by saying: you must still repay your loan by January 18. For many SMEs, this is impossible to do,” said the vice-president of national affairs at the Canadian Federation of Independent Business (CFIB), Jasmin Guénette.

The catering and retail sectors are particularly affected. The Backbone center in Bromont, in Estrie, opened its climbing center and bistro five years ago.

To cope with the crisis, the company benefited from government aid during the pandemic.

“My partners and I are actively campaigning with the CLD and with our institutions with whom we have already taken out loans to find solutions or even see if there is a way for these moratoriums to be pushed back further. In the meantime, we are preparing to pay, but the holiday season must be extremely prolific to get there in January,” underlined the general director, Frédérique Marseille.

The repayment of COVID loans occurs in an inflationary context which is already giving entrepreneurs a hard time. Several companies are in the same boat, according to a survey conducted by the Chamber of Commerce and Industry of Haute-Yamaska.

“We are talking about 30% of companies which will have financial difficulties in 2024, which may even go so far as to go bankrupt,” explained the general director, Roxanne Gagné.

Between now and January 18, several entrepreneurs plan to refinance their loan with banking institutions. In the meantime, some groups are asking for payment flexibility, or even an extension of the COVID loan repayment deadline.