Article Key Points

  • CEBA payments are still a struggle for small businesses. Payments cannibalize investments that could lead to growth at a time when businesses are still struggling with price increases, low traffic, and performance lags.
  • We share an example with actual P&L numbers from one of our Ottawa-based members, NU Grocery.
  • The government could help small businesses by pushing the CEBA payment period beyond December 2025, and let business owners get back to what they do best – creating good jobs and contributing to the economy
  • Minimum Ask From BWA Businesses: Push back the CEBA repayment deadline beyond 2025

CEBA Loans are a looming cloud over Canadian businesses. We're asking the government to push CEBA Loan repayments to the end of 2025.

Jump to a Section CEBA Loan Repayments = Sleepless Nights CEBA & Nu Grocery Debt Situation Nu Grocery Profit and Loss CEBA Loan & Debt Payback Options What can businesses do about CEBA Loan Repayments

CEBA repayments create sleepless nights for business owners

CEBA repayments are a looming cloud hanging over many Canadian business owners. Most of our members are finally breaking even after a multi-year slog, but many are struggling with new challenges like less discretionary income in shoppers’ pockets, and higher inventory costs.

At a time when business owners need to focus on growing traffic and sales, they instead are facing tough decisions about debt repayment. Many took out (often cringe-worthy) loans from other sources, beyond CEBA – the friends & family loan, the take-out-equity-on-the-house loan, the supplier loan, the bank loan. Valerie Leloup, co-founder and CEO of NU Grocery (Ottawa’s first zero-waste grocery store) and a BWA member, walked us through a snapshot of her finances so we could better understand the situation small business owners are currently facing.

NU Grocery’s pandemic debt

Valerie and her business partner opened their first store in 2017 and by the end of 2019 had opened a second location. As a small bulk grocery store, NU saw a sharp decline in sales during the pandemic. The owners suspect that COVID turned shoppers off the idea of buying in bulk and shopping at a destination specialty shop.

Sales suffered so much that the owners closed one location in 2022 to reduce overhead costs and drive traffic towards their remaining location. Before the pandemic, their combined monthly sales were $170,000. They now generate $82,000 in monthly sales, resulting in a loss of $88,000 in gross revenue. Like many of our members, NU Grocery qualified for a Canadian Emergency Business Account (CEBA) loan of $60,000. The deadline to reimburse this interest-free loan and benefit from a $20,000 loan forgiveness is December 31, 2023. As of January 2024, the loan is automatically converted to a 2-year 5% term loan. A small proportion of businesses that received CEBA loans have paid it back – a majority are looking at their CEBA payment schedule and wondering how they’ll make ends meet. NU Grocery’s pandemic debt doesn’t stop with CEBA, and NU Grocery has also accumulated $50,000 in supplier debt that it is working on paying back.

NU Grocery’s profit & loss figures

Valerie generously took us behind the scenes of her business and walked us through her average monthly profit & loss statement based on the first four calendar months of 2023.

  • Total monthly sales = $82,000
  • Total Cost of Goods Sold (COGS) = $38,000
  • Other expenses including: repair and maintenance, payroll, rent, interest on pre-existing long term loan = $41,000
  • Profit = $3,000

Payroll does not include salary for the two business partners in this scenario. Valerie and her business partner have taken on other side jobs to support their livelihoods.  With a monthly profit of $3000 and the need to prioritize supplier debt to make sure NU Grocery still has products to sell, NU Grocery has no room to pay back the $60,000 CEBA loan by the end of December 2023 and take advantage of the partial loan forgiveness of $20,000. NU Grocery’s interest-free CEBA loan would be then converted into a 2-year 5% term loan, adding interest payments to their overall expenses. Valerie’s suppliers could be paid back by the end 2024 assuming NU Grocery only repays the interest on their loan in 2024 and does not pay back any of the principal loan amount.  However, by the end of 2025, NU grocery wouldn’t have been able to pay off the $60,000 and remaining interest. In fact, they’d need an extension until at least August 2026 if they were able to put all their profit ($3000/month) towards CEBA payments once they paid back their supplier debt. Without an extension, NU Grocery faces a conundrum: how to come up with tens of thousands of dollars to repay the loan and interest charges by December 2025? During this time, NU Grocery will not be able to put any money into growth (marketing, new equipment) and into supporting their staff (raises, professional development). This projection also assumes that costs will remain stable – an unlikely scenario. Not to mention that during all this time, Valerie and her business partner will continue to work on their business without earning an income. This scenario also makes a huge assumption that NU Grocery won’t need to hire anyone new (although we know that not providing wage increases with a rising cost of living is a reason staff members leave). Any new hires will blow NU Grocery’s budget and put them in the red.

What can Valerie, and other business owners, do?

Valerie has already reached out to her Member of (Federal) Parliament through an email, a phone call to the constituency office and by signing the CFIB’s online petition to extend the CEBA repayment deadline and amend the terms of loan forgiveness. She knows that she is not alone in this situation. In a recent interview, the President of the CFIB highlighted that 250,000 small businesses (that’s 19% of Canadian small businesses) were at risk of closing down after 2023 There’s power in numbers. More businesses signing the CEBA repayment petition means more MPs might raise this as an important business issue in caucus, which could lead to government action. Business owners can reach out to us at the BWA to share your numbers and stories. The more we can illustrate this is an urgent, looming issue for job-creators, the better the chances of landing a media story on it. Media works because it puts issues into the mainstream and politicians pay attention to what the voting public is talking about.