CEBA deadline looms for businesses as insolvencies rise in Nova Scotia

More people and businesses in Nova Scotia filed for insolvency over the last year than in any other 12-month period since 2020, another signal of growing financial stress after bankruptcies steeply declined during the COVID-19 pandemic.

The figures come as tens of thousands of businesses across the country, including many in Nova Scotia, face a Thursday deadline to pay back the bulk of their pandemic-era Canada Emergency Business Account (CEBA) loans.

David Moffatt, the Dartmouth, N.S.-based vice-president of insolvency trustee Powell Associates Ltd., said anecdotally there's been a significant rise in insolvency inquiries from businesses worried about their financial health, with the CEBA deadline "top of mind."

He also noted household debt levels have increased and interest rates are high, and he said how far consumer and business insolvencies rise is a key question being watched by those in his field.

"I think it's just a matter of time before we end up surpassing pre-pandemic numbers," he said Wednesday.

Insolvencies rising

In the year ending in November, there were 4,322 individuals (also known as consumers) and businesses that filed for insolvency in Nova Scotia, a nearly 27 per cent rise from the year prior, according to the federal Office of the Superintendent of Bankruptcy.

The increase was driven by proposals from individuals, which soared more than 41 per cent. Proposals involve a person or business offering a plan to creditors to pay off a portion of their debt without going into full bankruptcy and liquidation.

Business insolvencies also jumped from 24 to 41 in the year ending in November, among them the collapse of home-heating firm Maritime Fuels Ltd., which left prepaid customers in the lurch when it filed for bankruptcy this fall.

Insolvencies dropped significantly during the first year of the pandemic, as federal aid programs kept money flowing to households and banks offered deferrals on mortgage and credit card payments.

The CEBA program, which was backed by the federal government to help businesses weather COVID-19-related financial difficulties, gave interest-free loans of up to $60,000. 

Ottawa firm on CEBA deadline

The federal government has set Thursday as the deadline to pay back the bulk of the loan. Businesses that do so, or have applied to their bank for refinancing and repay by March 28, can have up to one-third forgiven.

If businesses don't meet the deadline, interest will start to accrue and they will have to repay the full amount in three years.

Lindsay MacPhee, owner of the Floatation Centre in Halifax, a company that offers people sessions in sensory deprivation flotation tanks, said her business is among those unable to pay back the loan.

She told CBC's Information Morning Halifax that she was grateful for the CEBA loan and had intended to pay it back, but rising business costs have made the last four years "anything but predictable." She has appealed to friends to lend her money so she can take care of the loan.

"What's going to happen is we're going to see a lot of businesses that are going to go through bankruptcy, closing their businesses," she said.

The Canadian Federation of Independent Business has urged the federal government to extend the deadline, something Prime Minister Justin Trudeau indicated this week will not happen.

Duncan Robertson, a senior analyst with the CFIB in Nova Scotia, said a recent survey of 179 members of the organization in the province found more than a quarter that took CEBA indicated they could not repay the loan.

Some are seeking financing through their banks to pay back the loan, and to receive the one-third forgiveness, but Robertson said the process has been a "mess," with some bank staff confused about how to proceed. 

"What we're really concerned about is those who are going to miss out on that forgivable portion," he said. "For many, that will often be the straw that breaks the camel's back."