Councillors decided last week to provide the funding to pay creditors after the 2019 event, which involves a balloon glow and food and wine market, failed to meet patronage expectations.

The 2020 event has been cancelled due to COVID-19 - the money was initially intended to pave the way for the 2020 event to proceed.

Cabonne mayor Kevin Beatty said it would now help to facilitate the 2021 event.

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"It's a major economic boost, not just for Canowindra, but for Cabonne and the region," he said.

"It's around a $1.3 million injection to the economy so it's going to be really important in 2021."

The council had indicated support in February, but needed to put the proposal forward for public comment.

The submissions period closed during the council meeting and five were considered - three in support and two against.

Geoff Beath of the Canowindra Showground Trust said the significant debt to the showground placed its viability at risk and threatened other activities, including squash, team penning, golf, pony club, trotting and dance classes.

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Objectors said the debt should be met by the organising committee, not the council.

The funds will be paid from the council's Canowindra town improvement fund.

The council was to donate another $30,000 from the events assistance fund, but due to the cancellation, the organising committee is expecting to return $20,000, with some funds already spent.