Extending CEBA deadline would help marginalized businesses, groups say

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Ottawa should forgive a greater portion of pandemic loans because businesses owned by women and marginalized groups are more likely to struggle to repay the loans, a coalition of business groups says.

The federal government launched the Canada Emergency Business Account in the early days of the pandemic and extended interest-free loans of either $40,000 or $60,000 to almost 900,000 businesses, a total of $49-billion. As of March 31, only about one in five had been repaid.

Businesses that repay their loans by Dec. 31 will have either $10,000 or $20,000 forgiven, depending on the size of the loan. As of Jan. 1, no amount will be forgiven, and interest will begin to accrue at the rate of 5 per cent.

Anita Agrawal, the owner of jewellery manufacturer Best Bargains Jewellery, took out a CEBA loan in 2020 to help her business transition online. When travel shut down amid the pandemic, she could no longer rely on trade shows to expand her network of 3,000 retailers that carry her products, which include the jewels4ever brand.

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She said industry trade shows are finally back, and she is now faced with a decision: pay back the CEBA loan in full or invest in her business by making new inventory and travelling to shows again.

“We’re not operating on very big margins as it is,” she said.

And many small businesses do not even have the funds on hand right now to pay off the loans, according to Liliana Camacho, director of the small-business advocacy group the Better Way Alliance.

Those least likely to be able to repay their loans by the end-of-the-year deadline are in industries heavily affected by lockdowns, such as food services, retail and tourism. “It’s a consistent story that if the business had to temporarily shut down, they are really struggling,” Ms. Camacho said.

According to a federal government study released in March, those were also the industries most likely to apply for a CEBA loan: 82 per cent of accommodation and food services businesses applied, as did 78 per cent of tourism businesses.

But those two industries are also among the most likely to have a female owner, according to Statistics Canada. By contrast, only 54 per cent of information and communication technology businesses – which are much more likely to be exclusively owned by men – applied for CEBA loans.

The same dynamic is at play in terms of ethnic diversity: Seventy-five per cent of businesses owned by a visible minority (the term Statistics Canada uses) applied for a CEBA loan, compared with 65 per cent of all businesses.

Frances Delsol, the Black Business and Professional Association’s (BBPA) vice-president of national partnerships, outreach and procurement, said many businesses reached for the CEBA lifeline in the early months of the pandemic without having a clear plan on how to pay it back.

“I think they took it because the repayment date was so far away, but the pandemic really took its toll on Black businesses,” she said.

All this means that any economic fallout from the upcoming CEBA repayment deadline will disproportionately harm businesses owned by women and members of racialized groups, according to an open letter released Thursday by the BBPA, the Better Way Alliance, the Canadian Women’s Chamber of Commerce, the London Chamber of Commerce and KB Consulting, a small-business advisory firm.

The groups are calling on the government to not charge interest on CEBA loans until Dec. 31, 2030, and to immediately increase the forgivable portion to 50 per cent and have it decline incrementally every year until 2030.

They are advocating for these changes to be made for all CEBA recipients, not just those from marginalized groups.

Katherine Cuplinskas, a spokesperson for Finance Minister Chrystia Freeland, declined to say if the government would consider extending the deadline but said the CEBA program did its job in helping small businesses survive the pandemic and position themselves for an economic recovery.

Nancy Wilson, the chief executive officer of the Canadian Women’s Chamber of Commerce, said that if the government’s ultimate goal was to keep businesses open, extending the deadline and increasing the forgivable portion of the loans would achieve that. She said that if some businesses are forced to close because of the debt, Ottawa would ultimately recoup less money.

“You can’t get blood from a stone, right?”