The federal government gave small businesses $49 billion worth of pandemic loans but forgot one crucial step: A plan to get it back.
Driving the news: Over $5 billion given to businesses through the Canada Emergency Business Account (CEBA) may be particularly difficult to get back, per The Globe and Mail.
Why it matters: As the government continues to crack down on individuals who received pandemic-era CERB benefits, a lack of oversight for business loans could not only send the wrong message on priorities but undermine these types of future government programs.
- Nearly 900,000 businesses were approved for loans worth up to $60,000 that are interest-free and partly forgivable if the balance is repaid by December 31, 2023.
- Over 100,000 borrowers might need to be chased down for repayment (the number may be higher), 40,000 of which weren’t eligible for the loans in the first place.
The program was not designed with a mechanism to collect funds from those who did not repay, and the eligibility requirements did not involve the creditworthiness of the recipient.
Yes, but: As the first pandemic relief program for small businesses, CEBA’s fast and loose approach was adopted to help businesses struggling to survive widespread shutdowns.
Zoom out: The duty of collecting the outstanding loans now sits with the Canada Revenue Agency after being moved away from Export Development Canada and the financial institutions involved—which, according to both, were unable to handle collections.