From the day he opened Riverhead Brewery in Kingston, Ont., with his business partners, Aaron Martin believed year three would be the big one. And for the first two and a half months of 2020, the brewery was setting sales records.
Then everything came to a halt.
“COVID just was just crushing,” he told Global News. “Emotionally, financially and mentally draining. I’ve never experienced anything in my life like this. And right now I seem like a pretty go-lucky guy; talk to me in five minutes and it’ll be a total different story.”
Today, he’s making do with three full-time and one part-time staffer after having 15 a year ago. His restaurant is closed, leaving him to scrape together sales wherever he can. When he’s not brewing beer, he’s now canning, packaging and then after work delivering 12-packs in and around the Kingston area.
He and his partners have applied for and received government assistance, but it’s left them with an additional $100,000 in debt to repay once the pandemic is over.
“We were put in a situation we had to take the money,” he says. “Our sales were cut in half, sometimes more. And if the market doesn’t come back right away, you know, then businesses won’t be able to repay those loans.”
It’s a fear shared by economists and the Canadian Federation of Independent Business, which has put together a list of recommendations for the federal government that include re-working and expanding existing programs and offering businesses debt forgiveness. CFIB CEO Dan Kelly says Canadian businesses, just like Riverhead Brewery, have taken on an average of over $100,000 in debt.
“That debt is going to be an anchor,” says Kelly. “It is going to drag that business underwater even as the restrictions begin to lift.”
Kelly says when Prime Minister Justin Trudeau announced an expansion of the loan program on May 19, 2020, he and his ministers promised more funding at a later date. Kelly says he’s still waiting.
“Business owners are tired of hearing politicians say that we’ve got your back,” he says. “That’s true for some. But it’s an incomplete message at best.”
A Ministry of Finance spokesperson told Global News in an email that the federal government “has not shied away from adjusting (support measures) to reflect the changing situation or feedback from small businesses across the country” and that as part of pre-budget consultations it’s asking Canadians how to improve on the COVID-19 response.
One area of particular concern for the CFIB is businesses that have been open less than three years. New businesses, Kelly says, don’t have the financial history to apply for loans. To apply for the rent or wage subsidy, businesses need to show losses from one year to the next, which is a problem for most entrepreneurs who have re-invested in their business instead of taking a profit.
Deloitte chief economist Craig Alexander, like Kelly, is worried about the amount of debt being carried by businesses. According to Statistics Canada, insolvencies were down 29.5 per cent in 2020 compared to 2019. Alexander says that points to the government programs keeping businesses afloat.
But he wonders how many of those are so-called zombie businesses, a term used to describe businesses that would close if not for government programs keeping them alive.
“When the government programs are eventually wound down,” he says, “we’re going to start to actually see the true economic scars.”
The only way to avoid that, he says, is to address the issue now.
“For businesses that were thriving, you know, you need to design programs that say, hey, this was an act of God that hit us,” he says. “It’s not your fault. So we’re going to help you get to the other side of this valley. And that’s what the programs are designed to do. But they may need some reform or some adjustment.”
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