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Forgive Federal Pandemic Business CEBA Loans

As a business consultant, I have witnessed firsthand the struggles of my clients who have borrowed funds through the Canada Emergency Business Account (CEBA) to keep their businesses afloat amidst the economic turmoil caused by the pandemic. These are hardworking individuals who contribute significantly to our economy, yet they find themselves unable to repay these loans due to continued financial hardship.

The CEBA was designed as a lifeline for small businesses during an unprecedented crisis. However, with over 800,000 approved applications and nearly $35 billion disbursed as of January 2021 according to data from Export Development Canada (EDC), it has become clear that many businesses are still struggling and may not be able to repay these loans.

We must remember that behind every business there is a person or family whose livelihood depends on its success. The inability to repay these loans can lead not only to financial ruin but also immense personal stress and anxiety.

Nearly 900,000 businesses were approved for the program, which distributed just over $49 billion in loans. About a fifth had paid their loans in full by the end of June.

According to a recent survey, 16 per cent of CFIB member businesses said they would be seeking an additional loan from their financial institution to meet the forgiveness deadline. Another 9 per cent said they were considering using home equity to help pay off CEBA on time.

Therefore, we call upon our government representatives and relevant authorities for compassion and understanding in this matter. We urge them to consider loan forgiveness for CEBA borrowers who continue facing financial difficulties despite their best efforts. By doing so, we can help ensure that our local economies remain vibrant while supporting those entrepreneurs who have been hit hardest by this crisis.

Canadians responded and to this almost 18,000 people have signed

Imagen 1

With numerous comments on how they haven’t recovered from the COVID19 crisis.

One of the most vulnerable business sectors are the entertainment.

As an example, restaurants, not only most of them have lost traffic, the increase in costs of food and labour have also contributed and impacted their bottom line.

Furthermore, interest rates have also increased, meaning that they would have to pay almost 10 times more in interest.

Pre-covid interest was at almost 1%
Now, close to 8%
Private lending could be even in 20s.

91% of restaurants took the CEBA loan of $60K
20% can't pay it back :(

Our plight for help got the attention of a radio station and CBC news.

They covered this news on CBC website and then on the CBC National.

So far none of the official Canadian parties have supported the petition.

I used a simple math and crouched the numbers to show that it is bad for the Canadian Economy if the inability to pay this loan would lead to a bankruptcy.

My case, let’s assume that there is a restaurant with 10 employees earning 60K per year. Also let’s assume after paying all the costs the restaurants makes 0 dollar net income.  As long as he/she keeps the doors open, the business and the employees are contributing 180K to the Canadian economy.


Now if he/she is forced to close the door, it is going to costs Canadian 300K in EI payments.

Here is the math:

How much does a business with no Net Income Pays to CRA including the employee deductions

 
                 

Assume 10 employees making on average 60,000 per year 

       
                 
                 
 

Employee

Employer

Total

         

CPP

3,220.50

3,220.50

 $      6,441.00

         

EI

948.00

1,327.2

         2,275.20

         

Tax

9,500

.00 

 $      9,500.00

         
                 

Total source deductions

 $   18,216.20

         
                 
                 

Assume this small business employs 10 staff

         
                 

10

  X 18,216.20

 

    182,162.00

         
                 
                 

If the business closes its door Finnane Minister loess 182,162.00

     
                 

Now Canada will have to pay EI to these 10 employees who lost their jobs at 55%.
Assuming one year of unemployment.

   
                 

Salary * 55%

 

       60,000.00

55%

    33,000.00

     

10 employees

     

  330,000.00

     
                 

Losses through employment closure

         
     

 $ 182,162.00

         
     

    330,000.00

         

Total losses

 

 $ 512,162.00

         
                 
                 

Other impacts:

             
                 

Employees on a daily basis would have spent money on

       
                 

Transportation costs 

             

Morning coffee

             

Lunch 

               

News paper

             

Store rent

               

Utilities

               

Goods 

               

HST 

               

Supplies 

               

 

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