The federal government cuts supplies to 50,000 SMEs

Fed cuts funding to 50,000 SMEs

UPDATE DAY

Justin Trudeau and his Minister of Finance Chrystia Freeland predict that the Canadian economy will soon go through a period of turbulence. They even mention the possibility of entering a recession, in particular because of the fight against inflation led by the Bank of Canada with its key rate hikes.  

During this time, the federal government will cut funding to 50,000 Canadian SMEs, including more than 10,000 from Quebec.

How? By making them lose the subsidies of $10,000 to $20,000 that the government had promised them during the COVID-19 pandemic under the Canada Emergency Business Account (CEBA).

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

THE PROGRAM

Recall that under this federal financial assistance program, nearly 900,000 SMEs were initially able to benefit from an interest-free loan ranging from 40,000 to $60,000 to support them financially during the health crisis triggered in 2020.  

Funds approved for loans and grants issued through the CEBA Emergency Account amount to $49 billion, while 571,851 SMEs have obtained loans of $60,000 and 326,420 have obtained loans of $40,000. $.

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

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

THE PROBLEM?

About 50,000 SMEs have just been notified by their respective financial institutions that their applications have finally been deemed ineligible and that they will therefore have to repay their loans by the end of December 2023 without being entitled to the grant of $10,000 to $20,000.

The Canadian Federation of Independent Business (CFIB) deeply deplores this decision by the federal government. 

According to it, the Trudeau government must revise its position and “ensure that all SMEs beneficiaries of CEBA loans who received them in good faith, but who are now deemed ineligible, can keep the grant portion of the loans [from $10,000 to $20,000]”, as is the case for other beneficiaries of the popular federal program.  

ON THE EDGE OF THE PRECIPICE

The very survival of many of them depends on it. By losing access to these grants of $10,000 to $20,000, SMEs declared ineligible will find themselves heavily over-indebted.  

“It is unfair to force SMEs that have benefited loans granted by the government in good faith to lose its main advantage,” laments the Vice-President of National Affairs of the Canadian Federation of Independent Business, Jasmin Guénette.

“It makes you wonder, he adds, if the government has not forgotten that many SMEs were struggling daily for their survival during confinements and restrictions. Asking small businesses that have benefited from the CEBA to repay their loan in full could be fatal for them given the enormous debts they have accumulated due to the pandemic.” 

DEMAND OF REVISION  

The CFIB is asking the Trudeau government to revise its position by allowing the 50,000 supposedly ineligible SMEs to keep the grant portion after repaying the balance of their loan. “At the very least, specifies the CFIB, a requalification process must be put in place for SMEs affected by this recall.” 

Faced with high input costs since the end of the pandemic, runaway inflation, labor shortages and supply chain disruptions, as many as 64% of SMEs are struggling with pandemic debt, averaging $144,000.&nbsp ;

To allow SMEs to give them time to regain their financial health, the CFIB is also asking the Trudeau government to postpone the repayment of loans from the CEBA emergency account program for another year, i.e. until December 31, 2024.

Originally scheduled for December 31, 2022, the deadline for repayment of loans (to be eligible for subsidies) has been postponed to the end of December 2023.