Bankruptcies in Alberta remained relatively low ahead of CEBA loan deadline while rest of Canada climbed

Relatively strong economic conditions have positioned Alberta better than other provinces ahead of the CEBA repayment deadline, said Charles St-Arnauld, chief economist at Alberta Central.

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Alberta has dodged a widespread increase in bankruptcies across the country over the past year — a trend that bodes well for the province as the deadline passed this week for small businesses to repay pandemic-era loans.

Relatively strong economic conditions have positioned Alberta better than other provinces ahead of the deadline, said Charles St-Arnaud, chief economist at Alberta Central, but a harsher effect will likely be felt over the coming years in isolated sectors such as hospitality and retail.

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Canadian small businesses that benefited from the interest-free Canada Emergency Business Account (CEBA) crossed the deadline on Thursday to repay their loans, a lifeline of as much as $60,000 created in the early weeks of the COVID-19 pandemic in 2020.

Businesses that met Thursday’s deadline to repay the loans saw $20,000 of the total forgiven by the government, amounting to a $40,000 repayment.

(Those unable to pay it upfront are allowed to refinance their loan through a bank, in which the $20,000 forgiveness will be honoured. The final option is to pay the full $60,000 loan over three years with interest.)

St-Arnaud, also a former Bank of Canada economist, said he’ll be watching the number of bankruptcies over the coming months to get a sense for the post-deadline fallout, alongside government data as it’s released.

So far, he said, bankruptcies in Alberta have remained low while the rest of Canada has seen a significant uptick dating back a couple of years.

Ontario, for example, saw 109 companies file for bankruptcy in November 2023, when a year earlier the province was seeing anywhere from 50 to 60 bankruptcies per month. Bankruptcies in Alberta, meanwhile, remain below pre-pandemic levels.

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Alberta bankruptcies

Alberta represents 14 per cent of all CEBA loans taken out across Canada — close to the percentage of Canada’s population it represents.

By March and April, St-Arnaud said, the data will begin to show how businesses are faring.

But the hospitality and retail sectors may face an uphill climb as consumers hold back on spending. Recent economic reports have referenced lower-than-expected spending during the holiday season, which can be a potential lifesaver for companies teetering on the edge, while organizations such as Restaurants Canada have warned one in five restaurants were forecast to close one or more of their locations.

“The hit will not be well-spread across the economy,” St-Arnaud said.

It’s a fear for Mona Pinder, executive director of the Alberta Hospitality Association, who said in an interview last week that restaurants — especially those in small towns with small populations — are still picking up the pieces from a brutal pandemic and increased costs in the years following.

“Sales have been increasing, but that’s kind of a false indicator because the margins are just not there,” she said. “It’s small mom-and-pop, rural community restaurants that are going to be hit the hardest. You’re losing some of that character of the community.”

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Alberta’s record population growth and relatively strong oil prices over the past two years have helped prop up the economy, St-Arnaud added, providing better conditions for small businesses than the rest of the country.

The number of recipients who repay their loans will also be a key indicator for Alberta’s economy, he said, though the federal government doesn’t publicly report regional repayment data.

Seventy per cent of CEBA recipients had repaid their loans as of Monday, said Katherine Cuplinskas, press secretary for federal Finance Minister Chrystia Freeland, but the federal government expects that number to increase, having reached the deadline.

As businesses grapple with repaying the loan, St-Arnaud sees both sides of a tricky situation.

“The question to policymakers is, ‘Are we helping those who were hit by COVID or are we now helping those who are struggling because of weaker demand and general economic conditions right now.’ ”

“It’s not an easy task — I can see both points in both directions.”

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