January 18 is the deadline for business owners who received Canada Emergency Business Account (CEBA) loans to repay $40,000 of the $60,000 borrowed and access $20,000 in loan forgiveness.
According to Angela Halvorsen Smith, Executive Director of the Rainy River Future Development Corporation (RRFDC), many small businesses in the Rainy River District didn’t qualify under the specific terms of CEBA but accessed similar funding through organizations like RRFDC.
“CEBA came out back in 2020, the government put money through the banks for businesses to apply for. They had to meet certain qualifications in order to get that funding,” Halvorsen Smith said. “There were certain businesses that didn’t qualify for CEBA loans, so FedNor, which is where our (RRFDC’s) funding comes from, created another program called the Regional Relief and Recovery Fund. So if people were unable to get CEBA at the bank for various reasons, at the beginning a lot had to do with the payroll or minimum sales or something to that effect, they could ask [RRFDC] for the Regional Relief and Recovery Fund (RRRF) loan. It was the same as CEBA but it was available to those who were unable to get CEBA at the bank.”
Some businesses were able to avail of those funds and get back on their feet quickly and repay their loans in short order while others have struggled to fully recover from the long restrictions which affected profits.
“I’m actually working right now on getting in touch with all of the clients that we had initially,” Halvorsen Smith said before Christmas. “As of the beginning of December we still have about 40 of those RRRF loans that are outstanding. So some people were able to pay them back right away. They got through COVID, they got back working and there was no problem.”
Some businesses, like those in the tourism sector have taken longer to recover as they lost more business due to travel restrictions like the closure of the border into and out of the United States.
“We know some industries were shut down longer than others, particularly the tourism industry. Some of them lost three whole years, three seasons of sales, because they only have one tourist season per year, so some of them are taking a bit longer.” she added. “We also had issues with flooding, a major tornado and storm that went through Nestor Falls and they hit some of the same businesses that were affected by COVID. Some of them, quite honestly, didn’t make it, others held on by their toenails. Some of them have been able to pay back a small portion, and others have been able to repay their loans completely.”
As the deadline approaches, there have been advertisements on television and radio for businesses looking to refinance their CEBA loans in order to save the $20,000 in loan forgiveness. Halvorsen Smith says some of RRFDC’s clients are working out other funding in order to get the $20k savings.
“I’ve been in touch with all of them and I’m going to say that probably one third to half of them will definitely be able to pay us out before the deadline and the rest are looking for solutions to refinance or find some other way to pay it back. I don’t think many have been able to go through the bank but I have two clients who were able to remortgage their house and with the money from that were able to pay back the loan.”
She says not all of their clients took the full $60,000 loan either. Some took as little as $12,000 to keep their businesses up and running but the majority did need the full $60k, she said.
If businesses are not able to meet the deadline in two weeks, the loans with the full $20,000 plus whatever else they still owe, will need to be paid off within three years.
Halvorsen Smith says that some people could be looking at payments of up to $1,700 per month depending on what they owe. The loans have not had any interest applied to them at this point either. As of the end of day on the 18th interest will begin accruing interest, which could be up to five per cent.
“They’re interest free until January 18, after that it can range up to five per cent. When we wrote [the loans] we wrote them at 2.45 per cent which is very low. We were given special permission to do that because they were COVID loans. I believe that was prime at the time,” Halvorsen Smith said. “So we were able to lend at prime that’s not typical of our organization, we typically do prime plus two, but again with special permission from FedNor we were able to do that.”
Unfortunately under RRFDC’s agreement with FedNor the corporation cannot directly refinance the RRRF loans, and repaying in the three years will put many in a bind.
“The term being that they have to pay it back in three years is what’s got a lot of people held up,” Halvorsen Smith said. “I think that if they could extend that repayment term even another couple of years then they could probably make it.”
Payments would have to start in February which is the toughest time for many businesses which are seasonally based and depend on the funds they make either around Christmas or in the tourist season to get through the rest of the year even without the additional expenses of a loan which is accruing interest. Even then, the Christmas season for retailers has been leaner than many years with the downturn in the economy and inflation making margins much smaller
“I think of all the loan clients I have, so far only one has said ‘yes, let’s go ahead and make those payments.’ The rest of them have told me ‘there’s no way I can do that. My business is too small, I’m not making enough, it’s my slow time of year,” she added. “Especially retail particularly and tourism organizations. They don’t have a lot of sales coming in January, February, March.”
