Navigating CEBA loans – what is your situation?

Did you take out a CEBA loan? If so, are you ready to pay it back this year, or would you like more time to pay?

The past few years have been a rollercoaster ride for small businesses, including salons and spas.

The COVID-19 pandemic, which began in March 2020 and extended into early 2022, brought about a wave of lockdowns and business restrictions. These measures, while necessary for public health, forced many businesses to temporarily shut their doors.

The BeautyCouncil worked closely with the province of BC to reopen salons early and keep them open with a comprehensive “reopening plan” and guidelines around safe operation. There was even a “mask off” allowance for those performing facials, upper lip waxing, and men’s shaves.

CEBA to the rescue

To help offset the financial blow, the government introduced several support measures. One of the most impactful was the Canada Emergency Business Account (CEBA). This program offered interest-free loans of up to $60,000 to small businesses and non-profit organizations. What’s more, if businesses could repay their loan by December 31, 2023, they could have up to 33% of it (a maximum of $20,000) forgiven.

The CEBA program, now closed, was a lifeline for many businesses during the height of the pandemic. It was a popular choice, with nearly 900,000 businesses borrowing a total of $49.2 billion.

Repayment time

However, as we approach the repayment deadline, it’s clear that many businesses, including salons and spas, are still facing financial challenges. According to a study by the Canadian Federation of Independent Business (CFIB), only 13% of borrowers have been able to fully repay their CEBA loan so far. With the deadline looming and many businesses still working to regain their pre-pandemic sales and profits, it’s important to consider the debt challenges they face.

In fact, according to CFIB, as of this spring, 40% of member business owners are struggling with significant debt, and 50% are experiencing below-average revenues. A vast majority of businesses (90%) have made use of CEBA loans, but only a small fraction (10%) have fully repaid these loans, while a whopping 78% haven’t started repayments yet.

So, what can be done?

According to the CFIB resarch in the chart above, many CEBA users are advocating for a deferral of the repayment deadline. In fact, 72% of all CEBA users would like to see the deadline deferred by one or two years. Only 19% of small and medium-sized enterprises (SMEs) believe that the current deadline is reasonable.

As we navigate these challenging times, it’s crucial for businesses, government, and financial institutions to work together to find solutions that ensure the viability of our cherished local businesses. For salons and spas, the road to recovery may still be long, but with the right support and resources, it’s a journey that can be successfully navigated.