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Niagara business faces closure after Ottawa lends, then takes back pandemic relief

Steve Kostecki says the money disappeared from his bank account, and when he reapplied, was told he'd already received it.

Steve Kostecki says the money disappeared, and when he reapplied, was told he'd already received it

Jakob Chapman, left, and Steve Kostecki have been lifelong friends after attending high school in Niagara Falls. They registered their first company on Dec. 29, 2015. This pre-pandemic photo was taken in 2018. (Ken Deal)

The owners of a Niagara business say they're on the verge of being forced into permanent closure after Ottawa granted them $40,000 and took it back again.

Muskoka/Niagara Craft Brewery Tours received $40,000 through the Canada Emergency Business Account (CEBA), a program that offers qualifying small businesses interest-free loans to help deal with the pandemic. 

Steve Kostecki, founder and co-owner, says he applied with business partner Jakob Chapman during the first wave of the pandemic. 

Their tour companies were shut down, Kostecki said, and the federal government didn't formally respond to the application. Then the money landed in the bank. 

"We were surprised to see that the money had been deposited into our bank account," he said. "We were awarded the CEBA."

Steve Kostecki, the founder and co-owner of Muskoka/Niagara Craft Brewery Tours, and his business partner Jakob Chapman applied for the CEBA during the first wave of the pandemic. (Submitted by Steve Kostecki)

According to Kostecki, instead of diving in and using the CEBA right away, they decided to let any expenses eat away at the small amount of money they had saved.

When the funds started to get low, he said, they knew it was time to start dipping into the CEBA. But "we checked our account one day and the CEBA was gone from our account." 

"It was removed on July 3," he said. "It was clawed back, taken back from us without any warning on July 3, [after being] deposited in May.

"It was taken back without any notice whatsoever or any reasoning for it."

We're in a situation now where we're probably two months away from having to probably shut down forever.- Steve Kostecki

According to Kostecki, they were advised by their bank that the government said they did not meet the requirements for the CEBA, and the funds were deposited into their account in error.

He said shortly after the government took back the funds, changes were made to the eligibility criteria.

"We looked at the changes and we were like, 'Wow, now we qualify even more, there is no argument about it, we qualify without a doubt,'" Kostecki said. They immediately reapplied.

Kostecki: 'It just seems to be smoke and mirrors'

He said after waiting for some time, the bank told him he already got $40,000 and couldn't get it again. 

"We were awarded the money but they took it back," Kostecki said.

"We're in a situation now where we're probably two months away from having to probably shut down forever.

"I have six children," he said. "I'm trying to figure out daily how I'm going to feed my kids. It's gotten that bad and the government is telling us that we can't work but they are not going to help us out. It just seems to be smoke and mirrors."

'Many businesses are facing challenges'

Youmy Han, press secretary and regional advisor in the office of the minister of small business, export promotion, and international trade, said she's not authorized to share details of specific businesses.

"We will be following up internally," Han wrote in an email. 

"We understand many businesses are facing challenges and are working to ensure they receive the support they need."

Loans provided through the CEBA program are guaranteed and funded by the government and intended to help small businesses pay for rent and other costs. (Submitted by Steve Kostecki)

The CEBA program — set up to provide up to $25 billion to small businesses — is administered through Canada's banks.

Loans provided through the program are guaranteed and funded by the government and intended to help small businesses pay rent and other costs.

Kostecki and Chapman have been lifelong friends after attending high school in Niagara Falls. They registered their first company on Dec. 29, 2015.

Chapman said by the end of 2019, their tour businesses grew to nearly $100,000 in annual sales and they had forecast sales would continue to grow by at least 25 per cent in 2020. But they were forced to close their businesses in March 2020 because of COVID-19.

"Our companies are on life support," Chapman told CBC News.

He said at least five other small businesses in the region are "in the exact same boat as us." CBC News has not been able to independently verify this information.

3rd loan application submitted

Chapman said they were recently advised by their bank that they are now eligible for the new $60,000 loan.

"We had to apply yet again. A third time. Unbelievable," Chapman said. 

"This third attempt was completed earlier today [Wednesday]."

But Chapman said they've now been advised there's a backlog of applications, so they might have to wait a while to learn if they will actually get the relief they so desperately need.

Deputy prime minister and minister of finance Chrystia Freeland announced the expansion of the CEBA program in December. (Adrian Wyld/The Canadian Press)

Since the spring, the CEBA has helped almost 800,000 Canadian small businesses and not-for-profits. 

Chrystia Freeland, deputy prime minister and minister of finance, announced the expansion of the program in December.

Since Friday, Dec. 4, 2020, eligible businesses facing financial hardship as a result of the COVID-19 pandemic have been able to access a second CEBA loan of up to $20,000, the government said in a media release. That's on top of the initial $40,000 that was available to small businesses.

Half of this additional financing, up to $10,000, will be forgivable if the loan is repaid by Dec. 31, 2022.

This means the additional loan effectively increases CEBA loans from the existing $40,000 to $60,000 for eligible businesses, of which a total of $20,000 will be forgiven if the balance of the loan is repaid on time.

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