Opinion: Small business pandemic loans must be repaid in full, even if companies risk going under

Open this photo in gallery:

A person walks in Kensington Market in Toronto on April 15, 2020. New Democrats and a business group are calling on the federal government to extend the deadline for small businesses to repay loans they received from a pandemic support program.Nathan Denette/The Canadian Press

Gus Carlson is a U.S.-based columnist for The Globe and Mail.

Just as there’s no crying in baseball, no “I” in team and no place like home, there is no such thing as a free lunch.

Like so many sensibilities tested by the pandemic, however, this basic tenet of free-market economics – and point on the moral compass that guides the conduct of most reasonable people – is under fire, and unjustifiably so.

Consider the pushback by a coalition of businesses on the repayment of pandemic-era interest-free loans of either $40,000 or $60,000 from the Canada Emergency Business Account (CEBA). Ottawa says businesses that repay their obligations by Dec. 31 will have either $10,000 or $20,000 forgiven. After that, there will be no forgiveness and interest will accrue at the rate of 5 per cent.

Many lenders would say that’s a pretty good deal – maybe not a free lunch but a nicely discounted one. But it isn’t sweet enough for some business owners, who are asking Ottawa to extend the interest-free provision or even forgive a greater portion of these loans. This is needed especially, some businesses say, because the enterprises that stepped up to the CEBA trough are more likely to be owned by women and marginalized groups.

To be sure, the dilemma is something of a Gordian knot. Balancing the needs of the few with those of the many is never an easy task. And with some businesses that took CEBA loans facing extinction if the repayment terms aren’t eased, it’s a matter of the many picking their poison for the government – prop up the program or face a heavier unemployment burden.

Extending CEBA deadline would help marginalized businesses, groups say

For some, the moral dilemma on the part of Ottawa is real. One small-business owner told The Globe and Mail last week that she was wrestling with the decision of whether to repay her loan or invest in her company to take advantage of improving market conditions. Unlike some businesses, she at least seems to have a choice – even if there is only one

Read more