Nearly 2,000 N.B. businesses took on new debt to repay CEBA loan

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Neary 2,000 New Brunswick businesses were forced to take on new debt to pay back enough of their pandemic loan to qualify for partial loan forgiveness, says the Canadian Federation of Independent Business.

It means a sizable number of the province’s businesses are now saddled with new private bank loans with high interest rates.

Brunswick News has reported that a total of 12,091 New Brunswick businesses were approved for interest-free Canada Emergency Business Account federal government loans during the pandemic.

The federal government’s own statistics say a total of $648 million was handed out to the province’s businesses in increments up to $60,000 as part of $48.4 billion that went out across the country amid pandemic lockdowns that nearly shuttered the Canadian economy.

But a stipulation of the loan was that an unforgivable portion had to be paid back by the end of 2023.

If it was, the feds would forgive up to a third of the money it provided.

That said, if the unforgivable portion wasn’t paid back in time, a business is required to repay the entire loan back in full. That’s as it starts accruing interest at a five per cent rate.

The Canadian Federation of Independent Business says a survey of its members shows that 1,935 businesses in New Brunswick went to a private bank in order to get the money to pay off the government loan.

That was as roughly 200,000 businesses across the country took on new debt to refinance their Canadian Emergency Business Account loans in order to retain access to the forgivable portion.

“Many of those businesses that had to borrow to repay their CEBA loans are facing high interest rates and will be challenged to meet their payment obligations,” said Canadian Federation of Independent Business president Dan Kelly. “We need to remember that while government got a lot of CEBA balances repaid, the debt for many businesses didn’t suddenly go away – it just shifted from a low interest government-backed loan to a higher interest bank loan.

“This should sound the alarm for policymakers, particularly given the business insolvencies are surging.”

The total number of insolvencies in Canada increased by 20.6 per cent in January 2024, compared to the previous month, while being 27.4 per cent higher than a year ago.

That’s as consumer insolvencies increased by 23.5 per cent, while business insolvencies increased by a massive 129.3 per cent.

“Accommodation and food services, retail trade and construction registered the biggest increases in the number of insolvencies,” according to the country’s Office of the Superintendent of Bankruptcy.

In New Brunswick, consumer insolvencies have increased 13.3 per cent year over year, with 255 declared.

That said, it’s a number still below pre-pandemic levels.

Meanwhile, business insolvencies were flat in New Brunswick with just three recorded in January of this year, the same number as a year ago.

There have been 32 insolvencies over the last year, compared to 26 the year before.

Prime Minister Justin Trudeau has held firm on the federal government’s decision to see the loans paid back.

“We understand that things – even as the economy has bounced back from COVID – continue to be challenging, which is why we extended, twice, the repayment deadline for the CEBA loans,” Trudeau said last month.

“But we are now far enough from the pandemic that we do have to wrap up pandemic programs.

“Pandemic supports, we all know, had to end at one point.”