The federal government is cutting supplies to 50,000 small and medium businesses

Justin Trudeau and Finance Minister Chrystia Freeland predict that the Canadian economy will soon go through a period of turmoil. They even mention the possibility of entering a recession, especially due to the Bank of Canada’s fight against inflation by raising key interest rates.

During that time, the federal government will cut funding for 50,000 Canadian small and medium businesses, including more than 10,000 Quebecers.

How? By making them forfeit grants of between $10,000 and $20,000 that the government promised them during the COVID-19 pandemic under the Canada Emergency Business Account (CEBA).

the reasons? These SMEs were deemed ineligible for this financial assistance program for technical reasons related to payroll size (too small or too large), non-deferrable expenses, and tax structure.

the program

It should be noted that under this federal financial assistance program, approximately 900,000 SMEs were initially able to take advantage of an interest-free loan of between $40,000 and $60,000 to support them financially during the health crisis that erupted in 2020.

Funds approved for loans and grants issued through the CEBA Contingency Account amount to $49 billion, while 571,851 small and medium-sized businesses took out $60,000 in loans, and 326,420 took out loans worth $40,000.

The allure of this federal loan? Attached to this loan, a grant of $10,000 to $20,000 will be provided to SMEs that will repay the said loan by the end of December 2023.

In Quebec alone, there were 182,923 loans and grants initially approved, with a total value of $10.1 billion.

the problem?

About 50,000 SMEs have been notified by the relevant financial institutions that their applications were ultimately deemed ineligible, and as a result, they will have to repay their loans by the end of December 2023 without being eligible for the $10,000 grant. .

The Canadian Federation of Independent Business (CFIB) deeply regrets this federal government’s decision.

According to her, the Trudeau government should review its position and “make sure that all SME recipients of CEBA loans who have obtained them in good faith, but are now deemed ineligible, can retain the support portion of the loans.” [de 10 000 $ à 20 000 $]As is the case for other beneficiaries of the Federal People’s Program.

On the edge of the abyss

The survival of many of them depends on it. By losing access to these $10,000-20,000 grants, SMEs that have declared themselves disqualified will find themselves saddled with debt.

“It is unfair to force small and medium-sized businesses that have benefited from loans granted by the government in good faith to lose their main advantage,” the Vice President of National Affairs at the Canadian Federation of Independent Business, Jasmine Genetti laments.

He adds: “It makes you wonder, if the government had not forgotten that many small and medium-sized businesses were struggling daily for their survival during periods of confinement and restrictions. Requiring small businesses that benefited from CEBA to repay their loans in full could prove fatal for them given the massive debt accumulated due to the epidemic.

Request a review

The CFIB is asking the Trudeau government to review its position by allowing 50,000 presumed ineligible SMEs to keep the grant portion after their loan balance is paid off. “At least, the CFIB specifies, a rehabilitation process for SMEs affected by this recall should be put in place.”

Faced with rising input costs since the end of the pandemic, hyperinflation, labor shortages, and supply chain disruptions, up to 64% of small and medium-sized businesses are in pandemic debt, averaging $144,000.

To allow SMEs to give them time to regain their financial health, the CFIB is also asking the Trudeau government to defer loan repayments from the CEBA Emergency Account Program for another year, that is, until December 31, 2024.

Originally scheduled for December 31, 2022, the loan repayment deadline (to qualify for subsidies) has been pushed back to the end of December 2023.