Ottawa’s CEBA extension “falls short” of addressing financial strain, says TIAC

The Canadian government will extend the repayment deadline for its small business pandemic loan program – the Canada Emergency Business Account (CEBA) – by one year, CBC News reports.

There is, however, some fine print to note as businesses will still lose the forgivable portion of the loan if they don't repay it in the coming months.

CEBA was introduced during the pandemic to help small businesses who were forced to close or limit their operations due to public health restrictions.

The program offered interest-free loans backed by Ottawa, and the deadline to repay has already been extended several times.

The original deadline was marked for the end of 2022, and it was later extended to the end of 2023.

Nearly 900,000 businesses were approved for CEBA, which circulated more than $49 billion in loans. According to CBC, only 21 per cent of businesses had fully repaid their loans as of May 31.

"While many have paid these loans back, we know that some need a bit more runway," Trudeau said Thursday. 

Under the new repayment policy, businesses will be granted a small extension — until Jan. 18, 2024 — to qualify for debt forgiveness, and businesses that refinanced their loans will be given until March 28 to qualify.

All loans will reportedly start accruing five per cent interest if not repaid by Jan. 19.

According to the Government of Canada's website, CEBA loan holders who make a refinancing application with the financial institution that provided their CEBA loan by Jan. 18, 2024, the repayment deadline to qualify for partial loan forgiveness now includes a refinancing extension until March 28, 2024. 

"This will allow more small businesses and not-for-profits to access relief and give them more time to hear back from their financial institutions on refinancing applications," Ottawa says. 

As of Jan. 19, 2024, outstanding loans, including those that are captured by the refinancing extension, will convert to three-year term loans, subject to interest of five per cent per annum, with the term loan repayment date extended by an additional year from December 31, 2025, to December 31, 2026. 

Small businesses and not-for-profits will automatically have access to a three-year, low-interest loan of up to $60,000 if they have not repaid or refinanced their loan, Ottawa says. 

"This will provide those who are unable to secure refinancing or generate enough cashflow to repay their loans by the forgiveness deadline an additional year to continue repayment at a low borrowing cost." 

Repayment on or before the new deadline of January 18, 2024 (or March 28, 2024 if a refinancing application is submitted prior to January 18, 2024 at the financial institution that provided their CEBA loan), will result in loan forgiveness of $10,000 for a $40,000 loan and $20,000 for a $60,000 loan.

The news is germane to PAX readers as many travel agencies, and travel advisors, accessed pandemic-era loans from the government during the pandemic – the CEBA being one.

Recent data released by the Association of Canadian Travel Agencies (ACTA) – now The Association of Canadian Travel Agencies and Travel Advisors - suggests that many travel pros who accessed loans are still carrying the debt, and aren’t yet in a position to repay.

“Agencies are trying to move forward, but they have all of this debt from two years ago,” Wendy Paradis, ACTA’s president, told PAX in an interview last month.

ACTA, for more than a year now, has been seeking information on preferred solutions for loan repayment and forgiveness, extending repayment deadlines, and modifying loan terms.

The association’s summer survey – which focused on CEBA, the Regional Relief and Recovery Fund (RRRF), and the Highly Affected Sectors Credit Availability Program (HASCAP) – revealed that 50 per cent of 239 survey participants are still recovering from the pandemic with a slow return to profitability.

And when asked what measures would be most helpful in being able to repay government loans and debt, 72 per cent would like to see more loan and debt forgiveness and 16 per cent said a longer period to pay.

“There’s a perception that the travel industry is flying right now because it’s so busy,” Paradis said. “But we need to let [the government] know the real story – that this industry was shut down for two years, and even though the government came forward with relief, it was not covering the expenses. Month by month, all of these businesses continue to go into debt.”

Word of Ottawa extending CEBA’s repayment deadline spread quickly at ACTA’s travel industry summit in Toronto on Thursday (Sept. 14).

Paradis (without knowing all the details just yet) said she was “delighted” by the news, adding that she was surprised to see the government act long before the Dec. 31 deadline that had been set for CEBA.

ACTA is reviewing the new repayment terms to ensure travel advisors truly benefit, but already, the plan is to push Ottawa to extend the deadline for loan repayment (and forgiveness) to 2025, Paradis said.

Extension falls short, says TIAC

The Tourism Industry Association of Canada (TIAC), meanwhile, is disappointed with the news.  

"We must emphasize that a mere three-month loan forgiveness extension for businesses needing to refinance does not align with the severity of the crisis," President Beth Potter said in a statement. "This falls short of adequately addressing the immense financial strain and uncertainty that our members are experiencing."

The short extension of the loan forgiveness period raises “concerns about the viability” of many tourism businesses, particularly small and medium-sized enterprises in communities right across the country, TIAC said.

The association is urging the government to reevaluate its decision for the tourism sector and extend the forgiveness period “significantly to provide necessary breathing space for a full recovery.”

“Such an extension would offer a lifeline to businesses striving to rebuild and contribute to Canada's economic revival, TIAC said.

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