CEBA: How Banks Profited While Small Businesses Folded
More than four years after the Canada Emergency Business Account (CEBA) was introduced, the federal government remains optimistic about the program’s economic impact. The Department of Finance recently stated it "does not expect" CEBA loan repayments to negatively affect the economy. However, the reality for many small businesses paints a different picture.
Emerging Financial Struggles
CEBA, launched in April 2020, provided interest-free loans of up to $60,000 to help small businesses manage operating costs during the pandemic. As the program’s repayment deadlines have passed—January 18, 2024, for forgiveness eligibility and March 28, 2024, for refinancing—many small businesses face significant financial challenges. The process has been muddied by vague government guidelines and inconsistent application of rules by lenders, which left business owners struggling to understand and navigate their obligations.
The Ministry of Finance insists that businesses were given "full information on timelines" and should have been able to plan accordingly. The ministry also highlighted the flexibility built into the program, which allowed businesses to refinance their loans and still benefit from partial loan forgiveness if they acted before the March deadline. Additionally, businesses could convert their CEBA loans into three-year, low-interest loans, delaying principal payments until the end of 2026.
Rising Insolvencies and Borrowing
Despite the government’s reassurances, the economic strain on small businesses is evident. A Statistics Canada report revealed a 57 percent increase in business insolvencies in December 2023—the highest in 36 years. In British Columbia, a significant 25 percent of the 122,890 businesses approved for CEBA loans failed to meet the repayment deadline, exacerbated by rising interest rates, inflation, and slow economic growth.
Moreover, a quarterly Equifax Canada report on business credit indicated a 74 percent surge in new installment loan originations in late 2023. This spike suggests that many businesses, desperate to meet the CEBA forgiveness deadline, have resorted to additional borrowing, often at higher interest rates. Jeff Brown, Head of Commercial Solutions for Equifax Canada, noted that the focus on meeting the repayment deadline has driven increased reliance on these loans, contributing to a notable rise in delinquencies.
Cash Grab for Financial Institutions
The administration of CEBA by Canadian financial institutions has also raised eyebrows. Banks and credit unions, tasked with distributing over $49 billion in loans, were compensated with an annual fee of 0.4 percent on outstanding loan balances—which could amount to nearly $200 million. While this fee was purportedly intended to cover administrative costs, critics argue that it most certainly provided financial institutions with benefits that were not fully transparent. The lack of public disclosure regarding the exact terms and conditions of these agreements, along with the involvement of over 220 financial institutions, has sparked concerns about the consistency and fairness of the program’s implementation.
Accenture’s Role in Administering CEBA
The administration of CEBA involved more than just financial institutions. The federal government awarded a $208-million sole-source contract to consulting firm Accenture Inc., a detail first reported by The Globe and Mail. This contract, which included responsibilities such as establishing call centers and integrating CEBA with financial institutions, was not initially disclosed in the government’s public records.
Accenture’s involvement extended well beyond basic administrative duties. The firm was tasked with operations, from managing a call center that fielded thousands of inquiries daily to creating the digital infrastructure necessary to disburse billions in loans swiftly. The full extent of Accenture's role, including their ongoing work on building loan collection systems, only became public through access-to-information requests. This lack of transparency, coupled with the decision to bypass competitive bidding, raises questions about the government’s reliance on private consultants during a national crisis and whether adequate oversight was exercised in awarding such a significant contract.
As the dust settles on the CEBA program, the challenges faced by small businesses highlight the complexities and unintended, albeit predictable, consequences of such policies. While the federal government maintains that CEBA was a necessary lifeline, the rising insolvencies, increased borrowing, and opaque administration by private contractors raise critical questions about its execution. The involvement of consultants like Accenture, coupled with the substantial fees funneled to big banks as small businesses shuttered, underscores the need for greater transparency and accountability in government programs.
