Tej Sandhu believes he’s one of the lucky ones who has the capability to pay off a loan he had to take from the federal government almost four years ago to navigate his Hamilton, Ont., restaurant and brewery through the pandemic.
But in the scramble to meet that deadline, Sandhu, the owner of Merit Brewing, believes most small restaurants like his with “incredibly low-margins” will simply have to raise menu prices to compensate at the expense of customers.
“We want people to be able to come every week, but we’re seeing a lot of people make the decision to come every other week or once a month now,” Sandhu says.
“That’s not great for anybody.”
Sandhu took the Canada Emergency Business Account (CEBA) offering from the Trudeau government in 2019. The program allowed eligible businesses to borrow up to $60,000 and see some $20,000 of it forgiven if they repaid two-third this January.
But Sandhu says a change in provincial rules tied to home alcohol deliveries, allowed him to pivot with a sales model he still has today.
“That actually accounts for 35 per cent of our business now,” Sandhu says.
“It was, and still is, a necessary shift for our business to have to make and … be able to be in this space.”
Non-profit support group The Bridge was also able to pay back its loan, but unlike Sandhu, now owes money “in other places,” according to board chair Sarah Warry Poljanski.
“Government grants pay our staff and some of our programming, but donations pay our rent, utility bills, insurance and other additional costs,” she says.
“Because all of the donations now have went to the CEBA loan, … we’re in a deficit.”
She says the ripple effect means the agency, which caters to mental health and addiction in men, will likely also make a pivot by putting off hiring another much-needed staff member and downloading more day-to-day work to existing staff.
“We have our board members who have now basically taken on different staff roles pro-bono,” she says.
“We want to make sure we don’t have to cut services because we know that they work.”
As of Friday, outstanding loans to Ottawa will be converted to three-year term loans, subject to interest of five per cent per annum.
Greg Dunnett, president of Hamilton’s local chamber, says the “climate is still not great” across the city for small business with the loans due, inflation, and a lot of businesses that have not seen full recoveries from the pandemic.
Dunnett cites numbers from a Canadian Chamber of Commerce survey that indicate about 24 per cent of businesses across Canada are in trouble or trying to figure out how to repay CEBA loans.
Dunnett says the numbers generally echo what he’s been seeing with his Hamilton members.
“Looking ahead to the potential of a recession, it’s just another added layer of our small business community being negatively impacted,” Dunnett says.
“For all of us who live in Hamilton, the little we can do to help support them is make sure we continue to shop local.”
Nearly 900,000 Canadian businesses were approved for a CEBA loan, totalling about $49.2 billion, and 575,000 of them were granted extensions.
Max Roy, vice president of the non-profit Restaurants Canada, says its data shows food service operators are a segment being hit hard in Canada with an estimated 53 per cent losing money or barely breaking even.
“That compares with just 12 per cent pre-pandemic,” Roy says.
“The data we have is that one in five restaurants that do have a CEBA loan said it will have to close some or all of their locations in the coming months.”
His agency suggests relief on the alcohol tax, indexed annually through the inflation rate, is one solution that could ease burdens on smaller restaurants.
“That would mean a 4.7 per cent increase this year,” he says.
“What we’re asking for is what they did last year, putting a ceiling on this at two per cent just to give a bit of breathing room for mom-and-pop restaurants across Canada.”
The Canadian Federal of Independent Business says pleas were made by “tens of thousands of small business owners” for an extension of the repayment deadline.
With the deadline now passed, federal Ministry of Finance spokesperson Katherine Cuplinskas suggests businesses refinance their loans or just take the three years at five per cent and repay it in full.
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