‘This is pretty perilous’: Small businesses hit hard by COVID-19
|Toronto Star 17 Mar 2020 at 16:12|
Even before Ontario declared a state of emergency Tuesday and urged residents to stay home, small businesses of all kinds were already hurting as a result of COVID-19 .
Most businesses have not been forced to close, but many are doing so voluntarily to protect their staff and customers. Those that have decided to remain open are dealing with a sharp decline in sales as a result of social distancing.
In an online survey conducted over the weekend of more than 8,700 small businesses from across the country, nearly half reported a moderate or significant drop in sales. A quarter of those surveyed said they wouldn’t be able to survive beyond a month if their sales were cut in half.
In the meantime, bills are piling up.
“This is pretty perilous for many, many businesses,” said Dan Kelly, president of the Canadian Federation of Independent Business, which conducted the survey. “My worry is that a lot of viable businesses are going to be taken out as a result of social distancing.”
This has led to calls for tax relief, deferred rent payments and other urgent financial assistance to keep businesses afloat.
Kelly said it would be “terrific” if landlords could give as much flexibility as possible to their small-business tenants, but landlords themselves are often individuals who rely on rent payments to pay their own bills.
“It’s not just a whole series of faceless corporations trying to rake in dough,” he said. “It’s often the dry cleaner that rents out two other bays in a strip mall and that income may be what they’re counting on to pay their employees while the business is shut down. My urging is that all companies use as much flexibility as they can to not make the problem worse, not to put businesses in even greater risk of bankruptcy.”
Commercial real estate giant Cadillac Fairview, the Building Owners and Managers Association Toronto, and real estate services firm CBRE all declined to comment for this story.
Toronto councillor Kristyn Wong-Tam, whose downtown ward includes many small businesses, said there should be a freeze on all payments and collections, including mortgages, both commercial and residential rents, and bank loans.
“There’s no point in asking one group of people to pay and not the other,” she said, echoing Kelly’s point that it would be unfair to defer rent payments without doing the same for mortgages. “At this point in time we should, as government, create a freeze on all demand payments and just recognize that everyone is going to be in this financial pinch.”
Wong-Tam said the federal government has authority over the Canada Mortgage Housing Corporation and the Banking Act to implement extraordinary measures in a state of emergency.
“They can use the institutions that exist today to halt the payments” so that “everybody is backstopped by the government.”
Prime Minister Justin Trudeau said Tuesday he will announce financial support Wednesday for both workers and businesses. He said the government has been looking at a “range of measures,” including additional support through EI, direct financial assistance for those who don’t qualify for EI, wage relief for businesses, help with mortgage payments and additional support for businesses’ access to credit and loans.
Last week, the federal government announced a credit program for businesses to be made available through the Business Development Bank of Canada (BDC) and the Export Development Canada (EDC).
Wong-Tam said the federal government needs to make sure any economic stimulus doesn’t leave behind small-business owners and the precariously employed.
“It cannot be only at the request of the lobbyists who work for big shopping malls and big land owners who get the breaks. Those breaks have got to come to everybody who’s financially harmed by COVID-19 right now.”
Toronto Mayor John Tory also announced plans to help local businesses and workers affected by the COVID-19 crisis, including a grace period on taxes, the potential of some kind of contingency fund and an expansion of the city’s small business advisory services.
Kelly said he was encouraged by promises of tax relief for small businesses, but he said the most urgent issue is paying employees, adding that he would like to see the federal government pay a portion of private sector wages to spare business owners while also ensuring workers keep their jobs. In Denmark, for example, the government is paying up to 75 per cent of private sector wages.
Get the latest in your inbox
Sign Up Now
For many businesses, Kelly said, having their employees simply work from home or shifting to online sales is simply not an option. Forty-two per cent of the small businesses surveyed said they could not conduct any business online and nearly two-thirds said online sales could only make up 10 per cent of their usual revenue.
“There is still a big chunk of the economy where face-to-face commerce is really hard to do without.”
Kelly said he doesn’t want the government to implement broad stimulus measures to spur spending. “This isn’t a time where Canadians are just sitting on their wallets and not spending,” he said. “That’s not the problem. The problem is Canadians cannot go out of their homes to spend their money.”