Nearly 50,000 Canadian small businesses have received notification that they are not eligible for the forgivable portion of a loan under the Business Emergency Account (CEBA).

That’s nearly 6% of the 900,000 loans guaranteed by the federal government under CEBA, Export Development Canada confirmed in an email.

The CEBA is an interest-free federal loan program for small businesses that have struggled during the pandemic. It allows you to borrow up to $60,000. Eligible borrowers can receive loan forgiveness for one-third of the loan, up to a maximum of $20,000, if they repay the entire loan before the end of 2023.

The fact that 50,000 companies are ineligible for the forgivable component of CEBA worries the Canadian Federation of Independent Business (CFIB). “There are companies that have applied in good faith and these companies have received the loan in good faith,” said Jasmin Guénette, Vice President for National Affairs of the CFIB. Suddenly we find ourselves in a situation where these companies are classified as ineligible following a procedure that is not particularly transparent.

Mr. Guénette finds it difficult to understand why so many companies are not eligible for loan forgiveness. “We ask ourselves, ‘What are the criteria that will ensure that the government deems the company improper?'”

He points out that the CEBA criteria have been expanded over time and that this may have led to confusion among SME owners about the eligibility criteria and the documents required.

A statement from the Federal Government on the main reasons why contractors were not eligible for funding could not be obtained.

After consulting Canada’s Department of Finance and Export Development, a spokesperson for Global Affairs Canada responded by email that applicants must have completed a certificate confirming they meet all CEBA requirements.

It should be noted that the approximately 50,000 targeted companies will continue to benefit from the interest-free loan from CEBA until the end of December 2023. However, they do not have to pay back two-thirds, but in full.

CFIB urges the Trudeau government to be more flexible in applying the eligibility criteria. “Apart from the undeniable cases of fraud, we call on the government to authorize the SMEs that have benefited from the loan to keep the subsidy share, or at least open an arbitration procedure so that the companies can explain why they considered their application to be worthwhile permitted.”

The lockdown notices come at a time when many small businesses are still living with the effects of the pandemic. Mr. Guénette points out that according to a survey of its members, half of Canadian SMEs would not have returned to their pre-pandemic income threshold and that two-thirds would have incurred debt as a result of the pandemic. “For a number of SMEs, this will be a major blow.”