The owners of the Persian restaurant Celeshmet on Victoria Drive are facing a Jan. 18 deadline to pay off loans from Canada’s Emergency Business Account.
CEBA’s $60,000 interest-free loan was a lifesaver in 2020 when the COVID-19 pandemic hit. The Khansari family had just opened their status quo as part of an assignment to immigrate to Canada from Iran as part of an entrepreneurship program.
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“At that time, CEBA was very useful, yes, because we just didn’t have a lot of cash or bills and we had secure day jobs based on our entrepreneurship program,” Behavar Khansari said.
Fast forward to now and this loan is more of an anchor. Khansari will have to repay $40,000 of the CEBA loan from the family’s savings to get forgiveness on the remaining $20,000, but he may at that point sell the business to get the money back.
“And $20,000 is a lot,” she said. “There is no other way. We have to pay this one, but I’m not sure about continuing, to be able to continue the business.”
Conditions have improved for Celeshmet, and Khansari likes the location.
But the “new normal” of COVID restrictions has proved challenging, as have the effects of inflation and emerging costs. Every month, Khansari says, is a struggle to survive.
Celeshmet may not be alone in making tough decisions, according to business teams who say the Jan. 18 deadline to repay CEBA loans will shape prospects for many B. C. s. small businesses in 2024.
CEBA offered businesses interest-free loans of $40,000 to $60,000 at the start of pandemic restrictions, with the option to forgive up to a third of the debt if they managed to pay off the balance by a certain date.
Some struggle to scrape together the money they need at the last minute to pay off the balance and get one-third of their loans forgiven. Others will fail.
A recent survey by the Canadian Federation of Independent Business suggests just 37 per cent of businesses repaid their CEBA loans already, with about 22 per cent unable to meet the Jan. 18 deadline and being forced to consider their options.
“Some eating places are going to close — we don’t know how many — because they just don’t have the cash flow,” said BC CEO Ian Tostenson. Restaurant and Food Service Association. ” It’s the worst time to ask businesses in January to pay a little, whether it’s a place to eat or a retailer. “
The profits restaurants make in December is what they rely on to get through the slower months and “they don’t have any money,” Tostenson said.
Restaurants likely would have been busier during the recent major holiday season, but their consumers spent less and opted for indulgence hours rather than reserving more expensive meals, Tostenson said.
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“The business was there from a customer count,” Tostenson said. But the profit was not, he said.
Many companies have also borrowed more during the pandemic, outside of the CEBA, which makes the prospect of turning that debt into a term loan, with some other monthly payment, unsustainable, unsustainable, Tostenson said.
Restaurants Canada, the national industry group, estimates that 53 per cent of Canadian restaurants are breaking even or at a loss, which it says underscores its last-minute request for an extension of the CEBA deadline.
However, requests for extensions of the CEBA deadline are decreasing; Deputy Prime Minister Chrystia Freeland, the holding company, noted on January 18 in recent statements that the deadline had already been extended.
The first repayment deadline set for December 31, 2022, was then extended to December 31, 2023, due to a recovery of activity that was not as physically powerful as expected.
Under pressure from business groups, opposition MPs and provincial premiers, plus those of British Columbia, Prime Minister David Eby-Ottawa extended the deadline again, but only until 18 January.
The program has $49 billion in aid for 900,000 small businesses and is “a critical component of the federal government’s immediate response to COVID-19,” Freeland press secretary Katherine Cuplinskas said in an emailed statement.
Companies that meet the deadline will lose partial loan forgiveness and will have to pay off the full amount borrowed, from $40,000 to $60,000.
The government says it did what it could to cushion the blow by setting the repayment term at 3 years, repayable until December 31, 2026, with an interest rate of 5%, which is less than advertising loans at preferential rates.
Businesses that prove they’re working with their lender have a grace period until March 28 to pay off their balances: either $30,000 if they borrowed $40,000, or $40,000 if they borrowed $60,000. $ – to win the refundable portion.
Companies that pay off their loans within three years will also have the option to pay interest only (without principal) until the loans mature at the end of 2026. Or they can settle them at any time without penalty.
“At the end of the day, if you’re a small business and lately you don’t have the budget to pay off your Ceba loan, you now have three years to pay it off in full,” Cuplinskas said. “The increased flexibility we’ve announced is vital for small businesses that would possibly still struggle to make ends meet. “
A significant number of businesses are still suffering enough to renew their loans, according to CFIB, whose survey estimates that 22 per cent of businesses in British Columbia are suffering. Companies will meet the Jan. 18 deadline.
“That’s one in five small businesses that will not be able to repay the loan in time to access that much needed forgivable portion,” said Annie Dormuth, CFIB’s provincial director for B.C. and Alberta.
That will be difficult for many businesses as they also cope with inflation and facing rent increases, higher property taxes and increases in payroll deductions.
“I think everyone went into 2023 hoping that this was the year that would help their companies recover from all that lost profits,” Dormuth said. “However, 2023 had another story to tell. “
Still, “a full economic recovery is simply a truth for many small businesses,” Dormuth said.
Business teams are keeping up the pressure on Freeland for a last-minute reprieve, given the number of people who have indicated they are struggling to pay, said Jasroop Gosal, director of policy and studies at the Surrey Board of Trade.
Gosal said restaurants, retail establishments and other service providers are struggling to get back to pre-pandemic revenues, which “doesn’t represent the expansion they want to pay off those massive loans. “
“On top of that, we have property taxes increasing, which leads to higher rental rates (and) increased taxation coming up for all businesses,” Gosal said.
The CEBA deadline also coincides with a slowing of B.C.’s economy in the past six months, which isn’t expected to get any better in 2024, according to Bridgitte Anderson, CEO of the Greater Vancouver Board of Trade.
“It’s a little early in the year, but our members and the business network at large have wonderful concerns, which were manifested months ago,” Anderson said.
In December, the board issued a warning about Vancouver’s economy showing signs of stalling at the same time businesses face increasing costs.
“We did see quite a few businesses close in the fourth quarter of 2023 and I think that’s going to continue for at least this first quarter” of 2024, Anderson said.
Even businesses that had the cash flow to save up to repay their CEBA loans by the deadline say an extension would give them much-needed breathing room.
“I’m waiting to the last minute, but yes, we have enough cash reserves to pay the $40,000,” said Mo Tarmohamed, operator of the Rickshaw Theatre concert venue on Hastings Street.
“It’s not a lot of time” as he hasn’t lost sight of them and Rickshaw saw an uptick in gig bookings once COVID-era restrictions were lifted as bands looked to “make up for lost time,” he said.
The CEBA was a lifeline when the Rickshaw had very little, but Tarmohamed said extending the payment period for another year would allow him to reinvest in his business at a time when exhibition ticket sales are starting to decline.
“It takes away any capital acquisitions or infrastructure improvements, which I would have to spend that money on,” Tarmohamed said.
Still, “in terms of the hospitality industry, I think music venues and music industry has recovered fairly well,” Tarmohamed said. “I feel sorry for other businesses, from what I hear, restaurants especially.”
A subset of 40,000 CEBA borrowers are in an even worse situation, having taken out loans of up to $60,000 that were later deemed ineligible because they met the criteria or because of errors in their applications.
These borrowers were required to pay off the full amount by December 31, 2023.
Peggy Lee, co-owner of Pegster’s Coffee Shop, a dining spot that typically serves soups and sandwiches on Lonsdale Avenue in North Vancouver, falls into that category. She’s asking for clemency after taking a flight of $40,000 from her and her husband’s retirement savings to pay off at least a portion of the loan.
She said the best they could come up with was that $40,000 and she’s now bracing herself to start hearing from the Canada Revenue Agency about repaying the balance. “It’s nerve-racking.”
Unpaid loan balances will be sent for collection, according to the program’s website, though it promises that businesses will “be presented with appropriate forbearance” on a repayment schedule.
Lee, 69, thought about retiring at the start of the pandemic, but she and her husband continued when they heard about CEBA because she loves serving the clientele they’ve built in the surrounding network and that “feels like family. ” »
“We have built a lot of relationships with the seniors here, with young people,” Lee said, noting there are more and more young customers because of apartments being built in the area.
Lee acknowledges that Pegster’s décor is dated, but she’s committed to keeping prices down. Sandwiches charge an average of $9, a giant soup charges $7.
Lee said she asked the lender who helped them with the CEBA process why they were eventually deemed ineligible, “but they don’t know.”
Now, she and her husband have to work a few more years to rebuild their retirement fund and are hoping the government can verify their eligibility for the CEBA loan so they, too, can get a portion of the loan forgiveness.
“To be fair, we owe them ($40,000), we have to pay them back,” Lee said. However, he also remembers Prime Minister Justin Trudeau’s statement: “We have your back. “
“We asked for a little more time. “
depenner@postmedia. com
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