Briefing binder created for the Deputy Minister of Finance on the occasion of his appearance before the Standing Committee on Public Accounts on December 9, 2024 on the Auditor General of Canada's report 8, entitled “Canada Emergency Business Account” - part 5

CEBA Economic Effectiveness

Issue

CEBA provided critical financial assistance to small businesses and non-profits during the COVID-19 pandemic.

Key points

• The CEBA program provided critical and timely financial support, helping to reduce insolvency rates among small and medium-sized businesses during the pandemic and allowed businesses to remain as a going concern despite the lockdowns.
• Statistics Canada found that nearly 56 per cent of businesses that received a CEBA loan reported that CEBA was necessary and sufficient to extend operations during the pandemic. While businesses were able to apply to more than one government support program, 43 per cent relied solely on CEBA during the pandemic.
• The Office of the Superintendent of Bankruptcy found that corporate insolvencies dropped by 24 per cent from 2019 to 2020 and decreased a further 11 per cent from 2020 to 2021, suggesting that CEBA was very successful.
• Over 80 per cent of loan holders fully repaid their loan by the March 2024, demonstrating the impact that the program had in keeping small businesses afloat during a difficult period.

Anticipated Questions and Answers

1. What role did Finance Canada take in monitoring program effectiveness?

Finance Canada led work with Industry, Science and Economic Development Canada and Statistics Canada to conduct surveys of CEBA loan recipients to understand the impact of the loans on small businesses. The Department also worked with EDC to monitor the needs of small businesses during the pandemic to inform program change, including regular communication with stakeholders including the Canadian Federation of Independent Businesses (CFIB), and monitoring data on corporate insolvencies and business exits.

Background

Analysis undertaken by Statistics Canada concludes that over half of businesses (55.9%) reported that CEBA was necessary and sufficient to extend operations during the pandemic, while just over one-quarter (26.1%) said that other types of government support were required in addition to CEBA. These data suggest that the level of support provided by CEBA was well tuned to the needs of most businesses. That a quarter of businesses needed to seek additional support also suggests that the program was not overly generous, and didn't only provide additional funds to businesses that were already likely to continue operations after the pandemic regardless of the financial support received. 

While businesses were able to apply to more than one government support program, 43.1% relied solely on CEBA during the pandemic. Further, Statistics Canada data indicate that government support programs helped to reduce corporate insolvencies, particularly at the start of the pandemic, suggesting that CEBA contributed to maintaining the solvency of small businesses during this time. Insolvency rates fell by 24% in 2020 and a further 11% in 2021. Despite this, overall business exit rates did increase slightly, from 9.5% in 2019 to 10.2% in 2020. These data largely track with some businesses closing due to expected drops in sales during the pandemic.  

Corporate insolvency rates in Canada were comparable to those in the UK and US during the same period, with similar pandemic support programs in all three countries contributing to reduced insolvencies in 2020 and 2021.