A pandemic loan relief program for small business owners has paid more than $2 billion to borrowers who never qualified for it in the first place, federal records show.
The amount was disclosed as a result of a request by Conservative MP
Brad Vis, who represents the riding of Mission-Matsqui in B.C., according to Blacklock’s Reporter.
The MP
had asked for the dollar amount of Canada Emergency Business Account (CEBA) funds “that were initially provided to businesses that were later deemed ineligible.”
Cabinet, in an Inquiry of Ministry tabled in the House of Commons, put the figure at $2,047,682,710.
The
CEBA program was open for applications from April 9, 2020, till end June in 2021. By last January, it had provided over $49 billion to nearly 900,000 Canadian businesses, according to Department of Finance Canada.
The program initially
offered $40,000 in interest-free loans. About six months after its rollout, it was expanded to $60,000 with a third forgiven—a maximum of $20,000—on final repayment.
About 50,500 borrowers were later found to be ineligible, wrote staff, and the reasons given included “data quality issues,” suspicious business registration numbers, multiple loan applications by the same firms and “failure to respond to an audit request.”
Total losses under the CEBA program will not be known until 2024 as the federal government
extended the repayment deadline until the end of December this year.
According to Blacklock’s Reporter, the Canada Revenue Agency in a separate Inquiry of Ministry said 2,640 companies that received interest-free loans were found to be insolvent. Loans to failed firms totaled $1.05 billion.
The insolvency figures were tabled at
the request of Conservative MP Kelly McCauley who asked how many organizations that received funding under the CEBA and Canada Emergency Wage Subsidy programs are in receivership or insolvent, and how much funding the organizations received.
A report by the Department of Industry in December 2022 noted that businesses that borrowed from a federal relief program during the pandemic tended to be
small and heavily indebted.
“Most of these (53.2 percent) were micro-sized, having no more than 4 employees, and 38 percent had between 5 and 19 employees.”
Nearly 18 percent of businesses that received the CEBA loans in 2020, also requested other types of debt financing, such as second mortgages, lines of credit, term loans and credit cards, the report said.
