Castle in the air

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Help is a wonderful thing, but words and actions masquerading as help are the exact opposite. False hope hurts, and false hope is exactly what a lot of business owners got when the government rolled out the Canada Emergency Business Account (CEBA) loans to help small businesses during COVID-19. With the repayment deadline approaching, there is little doubt that CEBA repayment requirements will sink a number of businesses. 

January 18 is the deadline for businesses to repay their CEPA loans without penalty, and the penalty is “huge”, for lack of a better word. Business owners are not looking for handouts, and a loan is a loan, but when small businesses that employ average people end up needing to declare bankruptcy, there are no winners. Those loans are not being paid back either way, and employees and entrepreneurs lose their way of life. 

It’s true that a lot of small businesses in Canada are truly tiny, with half employing less than four people despite the fact that small businesses employ over 88% of Canada’s total workforce. The Canadian Federation of Independent Business has posited that up to 250,000 businesses are at risk of closing if an extension is not put in place for the CEBA loan repayment, which could mean that more than 1,000,000 Canadians will lose their jobs. 

Let’s be clear on the terms here: for CEBA loans not paid back by January 18, the remaining loan balance will no longer be interest free and will instead take on a 5% interest rate. The partial forgiveness offer for the loans will also become null in most cases where 75% of the loan is not repaid. Think of it this way: a small business that has managed to pay back $28,000 of a $40,000 loan would receive a $10,000 forgiveness if they could simply manage to pay back an additional $2,000 before the deadline. Those business owners who simply can’t get their hands on that kind of money right now will end up owing $10,000 more. Charged more money for not having money – government logic at its finest. 

To ensure a properly functioning economy, businesses must be self-sustaining. They must not rely on handouts, charity, or underpaid employees. This is an argument that we hear frequently any time minimum wage increases are considered. When small business owners complain that they can’t afford an increase to minimum wage, we argue that a business that can’t afford to pay its employees a living wage is not a viable business. I don’t disagree – making your money by underpaying and undervaluing the people who make your operations tick is neither fair nor sustainable. The COVID-19 pandemic, however, was different. The CEBA loan program was not meant to provide “handouts”, it was meant to help. We unfortunately underestimated how much help businesses would need in the wake of such an economically disastrous pandemic. 

We all know businesses that suffered permanent COVID closures. Those businesses didn’t fail of their own accord. A buffet owner being told that customers cannot dine in has just been given his business’ death certificate. The owner of a retail store being told they are not allowed to open for business because their goods are “not essential” still has bills to pay with no money coming in to pay them. I won’t pretend that I agreed with all of the mandates. I was running private child care during the pandemic for kids of essential workers, which made me an essential worker myself, in hindsight. There were periods when I was unable to buy the supplies I needed – toys and games, outdoor equipment, school supplies – to be able to do my job effectively. I’m sure that the owners of small mom and pop stores that sell these items would have loved to sell them to me as much as I would have loved to buy them. Instead, we practically made it a legal requirement to shop on Amazon instead (except for those with the patience for curbside pickup). 

This is not a COVID debate, but rather a rhetorical question about whether the tens of thousands of businesses potentially closing their doors next month could have done anything to need the CEBA money less. In short – they couldn’t. While over 25% of Canadians were receiving CERB income during the pandemic, small businesses that employ 88% of the workforce were instead given a loan. The borrowed money purchased pandemic PPE, and paid to keep the lights on in vacant buildings. No sensible entrepreneur would borrow money for such nonsense, but what choice did these business owners have in the face of the mandates?

Demanding the repayment of the CEBA money in a timely fashion is like demanding the proverbial “castle in the air”. It’s all well and good to wish for it, but it’s unlikely to come to fruition purely through a wish and a prayer. Money doesn’t grow on trees, nor does it materialize upon urgent demand, or under the pressure of deadlines and threats. 

The economic damage from COVID-19 was huge. I’m a fiscally conservative person, and don’t agree with throwing government money at most problems, but this case is different. We can’t help some but not others. It’s not okay that we gave money away to those who were laid off, but forced business owners to borrow money to stay above water while it was the pandemic (and government policies) that kept the tap on. 

If forgiving the CEBA loans is not possible (and I suspect that for reasons of fairness toward those who already paid them, it may not be possible), then we at least need some humanity. There is no reason to extend relief only to those who need it less. Forgive a portion of all loans, regardless of when they are paid, and negotiate repayment terms that work for each individual business. That, or give businesses a clean slate and watch them put those dollars right back into their employees and the economy. This time of year more than any, compassion should be above all. 

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