Small businesses struggle to repay CEBA loans on time

Grant Harasyn, owner of a Vancouver-based art department supplying props for the film and TV industry, has faced significant challenges due to the pandemic and subsequent Hollywood strikes. His business was initially impacted by the shutdowns and then struggled to recover once operations resumed. The looming January 18 deadline to repay the Canadian Emergency Business Account (CEBA) loan added to his financial concerns.

Ottawa provided close to $49 billion to nearly 900,000 businesses through the CEBA program. Eligible businesses can keep up to $20,000 of the maximum $60,000 loan if they repay the rest on time. However, this repayment deadline has prompted many businesses to seek refinancing options in order to keep the forgivable portion.

Harasyn attempted to refinance his CEBA loan with his bank but encountered lengthy delays. Frustrated with this process, he turned to alternative lenders like Merchant Growth, a non-traditional online lender that specializes in small businesses. Merchant Growth, in partnership with Fortress Investment Group, secured $300 million for CEBA refinancing and has developed a seamless online application process.

While alternative lenders like Merchant Growth offer convenience and speed, the trade-off is higher interest rates. University of Toronto marketing professor, David Soberman, explains that these lenders operate with higher costs to provide faster and simpler services. Soberman believes that businesses have a choice and must weigh the benefits against the higher costs.

CEBA’s unique situation, with hundreds of thousands of businesses needing to repay loans simultaneously, has created opportunities for non-traditional lenders to thrive. Technological advancements have enabled these lenders to operate more efficiently without the constraints of traditional banks.

With the impending deadline, many businesses, like Harasyn’s, have opted to pay higher interest rates from alternative lenders to secure the forgivable portion of their loans. While waiting weeks to hear back from his original bank, Harasyn is relieved to have the option to refinance and avoid potential financial strain of repayments.