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A CIBC sign is shown in the financial district in Toronto on Tuesday, August 22, 2017.Nathan Denette/The Canadian Press

Canada’s largest banks and credit unions plan to start offering government-backed loans to small businesses by next week, speeding up the rollout of the new lending program under pressure to deliver quick support to business owners.

Banks have been rushing to craft a program that will see the federal government guarantee their loans to small businesses of up to $40,000 interest-free until the end of 2022. The loans are part of a suite of measures unveiled last Friday by Finance Minister Bill Morneau that are intended to help small businesses struggling to survive owing to the novel coronavirus pandemic.

Initially, banks asked government for up to three weeks to deploy the loan program, which requires lenders to build online systems to process applications and disburse funds. Canada’s big banks each have hundreds of thousands of small-business customers – Canadian Imperial Bank of Commerce alone has more than 150,000 eligible clients – and banks are already working to process more than 213,000 requests to defer payments on personal mortgages.

But the Big Six banks and some large credit unions, including Vancouver City Savings Credit Union, are now aiming to start taking applications for the small-business loans the week of April 6. Banks faced pressure to move faster from owners who warned they could not wait for help.

There was also pressure from some banks that felt they were ready to move faster than their rivals, according to financial industry sources familiar with the talks. Banks are aiming for a co-ordinated launch by the middle of next week, but there is a chance some banks’ launch dates could be staggered, the sources said.

The Globe and Mail is not identifying the sources because they are not authorized to discuss the matter.

The federal government has promised $25-billion to guarantee the loans, removing the risk of losses for the banks. One quarter of each loan, up to $10,000, will be forgiven if businesses repay their balance before Dec. 31, 2022. After that date, loans will convert to three-year terms at 5-per-cent interest.

The loans will be available to small businesses and non-profits registered in Canada that had annual payrolls between $50,000 and $1-million in 2019.

A senior official with the Department of Finance said that Ottawa is still ironing out certain eligibility criteria with the banks, but borrowers will likely be required to apply to a bank where they have an established relationship. Disbursing funds through existing business operating accounts would help curb potential fraud and avoid creating competition for customers, financial industry sources said.

The small-business loans complement a $71-billion program Ottawa is creating to cover 75 per cent of employee wages for any company that has seen its revenue fall by 30 per cent or more during the coronavirus crisis. The program will take three to six weeks to get up and running, Department of Finance officials said Wednesday, and companies will have to reapply each month.

The small-business loans could offer faster relief. CIBC announced Wednesday it is launching a digital application process, and expects to make the loans available during the week of April 6.

“We know many small businesses in Canada have an urgent need to access the loan program announced by the federal government, so we have fully automated the loan application and disbursement process to get funds flowing as fast as possible,” Laura Dottori-Attanasio, CIBC’s head of personal and business banking, said in a statement.

Banks are bracing for a deluge of requests, but some small businesses are hesitant to take on loans during the crisis, worrying that the debt will be a burden over the long term. In a survey last week by Save Small Business, a group of more than 20,000 Canadian entrepreneurs that has lobbied Ottawa for more relief during the coronavirus outbreak, three quarters of respondents said they don’t believe low-interest debt is an appropriate remedy.

“I’m 62 years old, and want to retire,” said Bryan Van Tassel, owner of Boh’s Cycle & Sporting Goods in Moose Jaw, Sask. He said he has little interest in asking his bank for a loan. “This would make me have to work longer to pay off my debt."

With reports from Josh O’Kane and Mark Rendell

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