Many believe the federal government is unlikely to move the CEBA loan forgiveness deadline again

After a one-year extension of the original deadline, the date the federal government has set for payback (with forgiveness), of small business loans acquired during the pandemic is quickly approaching.

If paid back before December 31, 2023, up to $20,000 of each Canada Emergency Business Account (CEBA) loan will be forgiven. After that, each loan will incur a 5 per cent annual interest rate, on the full amount borrowed, (charged monthly) beginning January 1, 2024.

While there is some speculation that the deadline could be extended, many feel there is also plenty of evidence that it will hold.

Kevin Clark, Chief Revenue Officer for Merchant Growth, one of Canada's largest independent small business lenders is one of them. He believes the Canadian government has already committed significant resources to providing financial support to businesses affected by the COVID-19 pandemic, and extending the CEBA forgiveness deadline remains unnecessary and unlikely.

“There are a lot of good arguments from within the government that suggest that the program dates should be held and, in fact that has been reinforced through the budget that was delivered in early April, 2023 by Finance Minister Chrystia Freeland. She noted the offering of new programs of funding to support a variety of different interests wherein the capital for those programs is expected to come from the repayment of the CEBA loans.”

Clark notes, “that the Bank of Canada has been challenged with inflationary restraint, managing an interest rate environment to keep the economy moving forward, while at the same time, trying to manage inflation. An extension of CEBA debt really just moves a whole pile of credit into the following years, which is inflationary. This would not help the government's objective of managing the Canadian economy”.

Clark also points out that from his discussions with various constituents in Ottawa, changing the CEBA forgiveness deadline would require changes to the regulatory framework governing the program, which would be time-consuming and administratively challenging and could lead to uncertainty and confusion for both borrowers and the many lenders in the marketplace seeking to support their small business customers.

“One would think, given all of this planning, and the fact that we’re almost halfway through the year, and that the government has clearly indicated to no uncertainty its decision, that small businesses should now ensure that they are prepared, with the necessary capital, to take advantage of the forgiveness program,” he says.

“From our analysis of Merchant Growth’s ongoing portfolios, the actual average revenue of our small business customers is at or better than where they were performing pre-COVID. This suggests to us that small businesses want to move forward and manage their balance sheets as best they can. They see the value of finding ways to make that $40,000 loan go away, as opposed to having a $60,000 loan on their balance sheet for the next two years.”

While there is a possibility that, as the deadline gets closer, the federal government could pivot and end up extending it at the last minute, Clark says, the reality is that companies are better off managing the obligation now rather than taking the risk and waiting to see what happens. We are already seeing small businesses seek the capital to refinance their CEBA loan. It would seem unfair to the small businesses that have already proactively repaid their CEBA loans to find out they could have waited if there is an extension made on the forgiveness date so late in the program.

“The influx of applications into lenders will not in any way be managed in enough time if everyone waits, and many businesses are going to miss getting access to capital when it is perhaps finally confirmed that the deadline in fact holds,” he says.

“If a business does not have the cash on hand to pay back their CEBA loan by the December forgiveness deadline and the bank isn't an option, Merchant Growth is a good alternative,” says Clark.

To learn more about how Merchant Growth can help with your CEBA refinancing options, visit merchantgrowth.com.