Thousands of Canadian small businesses that received federal loans during the pandemic are staring down this week’s repayment deadline – and with extension hopes fading, some face the possibility of permanent closure.

Businesses that took out a Canada Emergency Business Account (CEBA) loan in 2020 or 2021 have until this Thursday to repay their outstanding balance and receive up to $20,000 of loan forgiveness.

Those that do not repay by the Jan. 18 deadline will lose out on the forgivable portion of the loan, and the remaining balance will begin to accrue interest at a rate of five per cent per year until Dec. 31, 2026.

Terry Shaw, owner of the Crown & Anchor Pub & Grill in Edmonton, is wondering what he will do once the repayment deadline arrives.

Customer traffic at his eatery never fully rebounded from the pandemic, he told BNNBloomberg.ca in a telephone interview.

After reducing staff to save on costs, he’s now considering digging into his retirement savings to pay back his loan.

“I will never make that back … and I worked hard all my life to save my money,” he said.

Without a last minute extension, he predicted many small business in his Edmonton community will have no choice but to close.

“It’s just crazy,” he said. “They’ll be shutting down.”

‘DIDN’T HAVE AN OPTION’

Shaw took out a CEBA loan in 2020 when he had to shut down his restaurant due to pandemic restrictions aimed at curbing the spread of COVID-19.

“I really have to thank the government for helping us out, but they had no choice because they shut us down,” he said. “I didn’t have an option … they had this two-bladed sword running up my caboose.”

Like many other restaurant owners, Shaw laid off employees during the pandemic and shifted focus to take out orders – but his business was only “scraping by.”

Alberta’s pandemic restrictions have since lifted, but Shaw said it’s been a struggle to get customers through his doors, leaving him with little cash to put towards his loan repayment.

“We’re running at about 70 per cent of what we saw in 2018,” he said, adding that customers who have returned have had less money to spend due to inflation and the high cost of living.

CALLS FOR AN EXTENSION

This Thursday’s repayment deadline has already been pushed back multiple times from its original date at the end of December 2022.

Most recently, it was pushed back to Jan. 18 from the end 2023 – but business groups say the latest extension still does not give vendors enough time.

The Canadian Federation of Small Business (CFIB) said Friday that an extension of the Jan. 18 deadline at this stage is “unlikely,” but pledged that the organization would fight for one until “the very last minute.”

The CFIB has been urging the government to extend the deadline for another year to give small businesses more time to get back on their feet.

Businesses were also offered the option to refinance their loans with a financial institution instead of repaying their outstanding debt by the deadline. Those that did have until March 28 to finalize new terms and still be eligible for the forgivable portion of the loan.

But some business owners who took that route have run into difficulties.

"My bank specifically has this stance — if you're not in a position to repay the CEBA loan, you're not a strong candidate to repay one of their loans," Jackie Morphy, owner of Ottawa shop All Eco, told CTV News Ottawa. 

Shaw said that extending the deadline by another year would be “excellent,” and would make a big difference for small businesses like his, noting that while customer traffic remains low, he’s noticing a small uptick.  

When asked if Ottawa would extend the deadline further, the government pointed to past extensions to the CEBA loan repayment deadline and other tweaks to the program such as the refinancing option and the fact that only interest payments are required until the end of 2026.

Katherine Cuplinskas, senior communications advisor for Finance Minister Chrystia Freeland, said the government has offered “significant support for small businesses who might still be struggling to make ends meet.”

ADVICE FOR BUSINESSES: ‘STAY ON TOP OF IT’

Businesses that don’t repay their loans by Thursday have until 2026 to pay it back in full, and will only be required to make payments on the five per cent annual interest during that time.

Stefanie Ricchio-Forlingieri of CPA Canada said business owners should consider treating their principal loan repayment as a current expense and start making payments on it right away.

“It's in your best interest to make probably monthly payments instead of hoping that by this new term you'll have that full lump sum available to pay the principal plus the interest back,” she told BNNBloomberg.ca by phone.

“I can't stress it enough: do it monthly, stay on top of it. It's the greatest investment that small business owners can make.”

Ricchio-Forlingieri acknowledged that many Canadian business owners likely won’t have the means to pay anything more than the interest on their CEBA loans, considering the economic challenges they face.

“Based on the data that I've been reading, they're projecting approximately 20 to 25 per cent (of businesses) are not going to make the payment back … some businesses will just not be able to make it,” she said.

With the clock ticking, business owners like Morphy say it's only a matter of time before closing for good becomes their only option.

"Now I'm one of those businesses who has no choice but to consider it," she said.

With files from CTV News Ottawa