Alberta association warns of 'mass exodus' of businesses because of CEBA repayment

Four out of five Alberta restauranteurs say they are facing a tough situation ahead of a deadline to repay their Canada Emergency Business Account (CEBA) loans, even with brisk sales supporting them.

Karen Kho, a member of the Alberta Hospitality Association, owns Lil' Empire Burger and Empire Provisions.

She says for many of her fellow business owners, the financial woes of the pandemic have remained, even long after the restrictions were lifted.

"There have been multiple costs associated with supply chain issues and inflation to

hospitality businesses that are posing a dire threat to our longevity," said Kho.

"From food costs, to take-out containers, to labour, our industry has been negatively impacted with costs at every possible turn and we need help."

$49.1 BILLION IN CEBA LOANS NATION WIDE

Across Canada, 898,271 businesses applied for CEBA loans for a total value of more than $49 billion.

Those loans were originally for up to $40,000 per business, but the limit was increased in December 2020 to $60,000.

More than half a million businesses country-wide availed themselves of the extra $20,000 in loaned money on the understanding the entire balance would need to be repaid in full by Dec. 31, 2022.

The federal government extended that deadline to Dec. 31, 2023, and then in September 2023 move the date to Jan. 18, 2024.

Brennan Wowk, AHA vice-president and owner of Bo's Bar and Stage in Red Deer, says despite the extensions, the repayment deadline will drive a spike through the heart of many businesses, particularly in rural Alberta.

"Many of our members have expressed they cannot afford the interest and will not be in a better position for a long time because of servicing that debt," said Wowk.

"This debt repayment, coupled with inflation is the last straw. We are going to see a mass exodus of restaurants in 2024."

The AHA says fewer than 50 per cent of restaurants are breaking even right now and restaurant bankruptcies have risen by 50 per cent year-over-year.

Supply chain issues, labour costs and food inflation are also making the idea of repaying CEBA loans difficult for many to fathom.

The group is calling on the federal government to forgive or extend the $20,000 grant to encompass all loan recipients.

Barring that, they're seeking another extension on the repayment deadline – to Dec. 31, 2024.

The AHA would also like to see an interest-free instalment plan instituted to allow restauranteurs to gradually repay the loans.

The province also has a role to play, it says, stating in a press release, "Alberta's restaurant industry finds itself in this situation due to decisions and policies of the provincial government during the pandemic."

The AHA says the province should consider ways to mitigate the damage, such as extending grants for smaller operators to reduce their loan payments by 50 per cent.

While the hospitality industry is the most challenged with the looming CEBA repayments, it is not the only sector feeling the deadline pressure.

NOT JUST THE HOSPITALITY INDUSTRY

The Canadian Federation of Independent Business (CFIB) says 25 per cent of its 99,000 members across the country say the loan repayment deadline threatens their business.

The CFIB's senior policy analyst for Alberta, Andrew Sennyah, says consumers will start to see the impact in their communities.

"Think about it in a very, very local context, you know, one in four of your favourite businesses closed down – that's just the reality," Sennyah said.

"All sectors are going to be impacted. It's not specific to one sector.

"It's retail, it's restaurants. It's everyone who took out loans. I think when we rewind time, all businesses were affected by COVID."

FEDERAL GOVERNMENT UNLIKELY TO MOVE

In an emailed statement to CTV News, Katherine Cuplinskas, press secretary to federal Finance Minister Chrystia Freeland, said the government has made changes to allow more latitude in repaying the CEBA loans.

"The bottom line is that, if you are a small business and do not currently have the funds to repay your CEBA loan, you now have three years to repay it in full," wrote Cuplinskas.

"The additional flexibility that we announced (in September) is significant support for small businesses who might still be struggling to make ends meet."

According to those rules, businesses that do pay off the entire amount by the Jan. 18 deadline will have $20,000 of debt forgiven.

Those still in the process of securing financing through a bank to pay off the loan in full will have that deadline extended to March 28.

Businesses that cannot pay it off or are not in the process of securing financing through a lender, will see the CEBA loan convert to a three-year term loan with a five per cent interest rate.

Recipients of that loan need only pay interest charges monthly, but full principal repayment will be due on Dec. 31, 2026.