Posthaste: Why thousands upon thousands of Canadian businesses may be about to close for good

Small businesses in Canada are running out of time to pay back government-backed pandemic-era loans, and failure to do so by the deadline could force nearly a quarter of a million to shut their doors for good, warns the Canadian Federation of Independent Business (CFIB).

Close to 250,000, or 19 per cent of small businesses, face closure if they can’t get an extension on paying back Canada Emergency Business Account (CEBA) loans, CFIB said in a new report released June 7. The repayment deadline is set for Dec. 31, and business owners who miss will lose out on having a portion of their debt forgiven. The price of missing the end-of-year limit is steep, amounting to an extra bill of up to $20,000, plus an interest rate of five per cent on their balance.

That added burden could have major implications for the sector because the vast majority, or 89 per cent, of small businesses took out CEBA loans during the pandemic to help them stay afloat, CFIB said. Of those, 68 per cent borrowed between $40,001 and $60,000, while 21 per cent took out $40,000 loans. Yet, months before the December deadline, only 10 per cent of business owners have been able to pay back what they owe.

Indeed, half of small businesses still haven’t bounced back from COVID-19, with revenues stuck below their pre-pandemic normal. Many owners are also carrying elevated loads of debt, adding to their burden. For 40 per cent, those debt levels are considered “heavy” or “high,” and 28 per cent are unsure they’ll be able to pay it all back.

As it is, the loan has become an added source of worry for small business owners now dealing with inflation, high interest rates and the threat of a recession, not to mention labour shortages.

“The CEBA loan, which once served as a pivotal economic lifeline during the nearly two years of COVID restrictions, is now a source of immense stress and anxiety for small businesses,” Corinne Pohlmann, senior vice president, National Affairs, at CFIB said.

Further, she said the impact of those closures could spread beyond individual owners and hit the broader economy. The timing couldn’t be worse, as many economists expect Canada to enter a mild recession in the latter half of the year.

The CFIB is calling on the federal government to push the deadline for repayment of the loans to 2025, or at least 2024. They would also like Ottawa to increase debt forgiveness to at least 50 per cent of the loans. Further, they are asking the government to create an appeal process for around 50,000 businesses that received the loans but have since been deemed ineligible.

“Ottawa must give (small businesses) more time,” Pohlmann said, “or we will see more ‘permanently closed’ signs in the coming months.”

Wildfire smoke from Quebec is spilling down across Canada and into the United States, causing hazy skies and spurring air quality warnings from Ottawa, to Montreal, to Toronto and even New York City, which received the title of most polluted major city in the world on the night of June 6.

Canada is on track to see its worst-ever wildfire season in recorded history if the rate of land burned continues at the same pace.

The country is experiencing an unprecedented amount of fire activity for this early in the season, scorching approximately 3.3 million hectares (8.2 million acres) — almost double the area of Lake Ontario — so far this year, according to Canadian government officials. That’s 13 times more than the average in the past decade for the same period.

The federal government is projecting the potential for higher-than-normal fire activity across most of the country through to August. Warm and dry conditions will increase the risk in June, particularly for the area stretching from B.C. to western Quebec.  — Bloomberg

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School may be out soon, but investing veteran Peter Hodson has a few lessons left for us. From chasing hot investment trends to analyzing too many things, here are a handful of popular mistakes to correct before sitting back with our Mai Tais.

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Today’s Posthaste was written by Victoria Wells (@vwells80), with additional reporting from Financial Post staff, The Canadian Press, Thomson Reuters and Bloomberg.

Have a story idea, pitch, embargoed report, or a suggestion for this newsletter? Email us at posthaste@postmedia.com.