CEBA Time Bomb.

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In December 2020 the government dished out over 800,000 loans to small business thru the banks. This amount was 49 billion dollars of which 16 billion is forgivable. This has to be paid back by this time next year.
Equifax predicts that as many as half of those businesses will default. If this happens how will this affect the banks and the economy as a whole ? I personally know of two such companies that will default.
Is CEBA a ticking time bomb we should be watching?

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Asked on December 10, 2021 10:59 am
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Hi there,

First, since this is a govenrment program that is delivered by the financial institutions, I don't think there will be that big of a financial impact on them. I'm not exactly clear on the mechanics, but if I'm not mistaken it came from the BoC and not the banks themselves who are just issuing the program.

Secondly, the loans to do not have to be repaid by this time next year - in fact, it is interest free till next year, then interest only payments until 2025 at which point the balance is due. They also already have baked in a level of debt forgiveness already which is going to lessen the impact.

All in all, I really don't think it'll have that big of an impact on any individual company - its moreso going to impact our Feds, money supply, debt and money printing. In other words, add it to the current laundry list of issues facing our federal government.

Mat

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Posted by Mathieu Litalien
Answered on December 13, 2021 2:15 pm