Many small businesses locked out of loan program

OTTAWA — Minister Mary Ng has yet to lift some restrictions around the government’s COVID-19 small business loan program, as frustrations mount among business owners excluded from the much-needed lines of credit.

In testimony before a House of Commons committee on May 21, the small business minister said her office was working “as quickly and as fast as we can go” to tweak the Canada Emergency Business Account (CEBA), which currently excludes companies that operate through a personal bank account. Many small businesses - like residential contract workers, barber shops and restaurants - operate through personal bank accounts rather than commercial ones, often because they carry out relatively few transactions.

Weeks after the committee meeting, Ng had yet to extend the program to personal accounts, largely due to uncertainty around whether a bank can verify whether those applicants are able to repay the loans, a government spokesperson said. Her office declined to provide an updated timeline on when the change could come.

“We know small business owners with personal bank accounts need our help, so we are working as quickly as possible to get this additional support to them at this challenging time,” a spokesperson for Ng said in a written statement.

The ministry also said separately this week it would tweak the program to allow companies with payrolls below $20,000 to apply for the loans, likely to be announced early next week. That adjustment should provide relief for some small businesses who were shut out of the program, often because they pay their workers through dividends, or hire contract workers.

In a May statement, the Canadian Federation of Independent Business said it was “especially unfair that some of the smallest and hardest hit business owners are unable to access this lifeline,” and called on Ottawa to lower the $20,000 threshold.

The CEBA offers up to $40,000 in interest-free loans to business owners, for which 25 per cent of the loan would be forgiven if repaid within a certain period of time.

Ottawa has spent $26 billion on the program as of June 10, with lines of credit extended to 663,000 small and mediumsized businesses.

Paul Hookham, owner of Edmonton-based Architectus Development, a small residential construction company that operates through a personal account, said many small businesses like his have gone into “hibernation mode” due to an inability to access working capital.