New Democrats and a business group are calling on the federal government to extend the deadline for small businesses to repay loans they received from a pandemic support program.
But an economist is cautioning against the move, saying taxpayers shouldn’t subsidize businesses that are still struggling to pay back the loans more than three years since the pandemic hit.
The Canada Emergency Business Account program provided about 900,000 small businesses and not-for-profits up to $60,000 in interest-free loans during the pandemic.
The deadline to repay these loans was extended last year to December 31, 2023 to ease pressure on businesses still recovering from the pandemic.
But now, both the NDP and the Canadian Federation of Independent Business are calling for this deadline to be extended again, with the federation claiming nearly 20 per cent of businesses are at risk of closure without an extension.
“While the NDP was glad to see the government listen to calls to extend the original repayment deadline, a second extension giving Canada’s small businesses more time to get back on their feet is needed,” NDP small business critic Richard Cannings wrote to Finance Minister Chrystia Freeland on Monday.
“There is a real risk that many will not be able to stay afloat, and a substantial portion of that debt will never be repaid.”
Businesses that pay back their loans by the end of the year are eligible to have up to a third of their loans forgiven. Those that don’t would see their debts converted to a two-year loan with interest of five per cent annually.
Miles Corak, an economics professor at City University of New York, said the request for another extension should give pause to policymakers interested in promoting productivity growth.
“If after three years, these firms are not in a position to repay loans that they took out voluntarily under a clear set of rules … they clearly are not able to meet the rigorous demands of a competitive market,” he said.
Nojoud Al Mallees, The Canadian Press
This report by The Canadian Press was first published July 11, 2023.