News

Government and banks help big business while small businesses go bankrupt

Government and banks help big business while small businesses go bankrupt
Business
If the government has “got our backs” and “we are all in this together,” then why are tens of thousands of good small businesses on the brink of bankruptcy while big businesses thrive?

Lockdowns target small businesses and the government supports are woefully inadequate to keep small businesses alive until summer this year.

It’s pretty clear at this point just how unfair the current Ontario lockdowns are on restaurants and main street retail businesses, while big businesses stay open, receive subsidies, make extra profits, and dole out dividends to shareholders and bonuses to executives.

Cases of COVID-19 are rising all over the province with no widespread vaccine rollout yet. Hope for moving out of the grey zone and back to the orange or yellow zone will not realistically happen until June 2021 or later for most areas of the province.

And while the aid programs offered by the federal and Ontario governments appear to be robust, they will not keep thousands of restaurants and small businesses alive until grey-zone lockdowns are eventually lifted. Something needs to change and it needs to change quickly.

According to Statistics Canada, 10 per cent or 10,000 restaurants have already closed for good in Ontario, while 50 per cent or 50,000 restaurants are at risk of closing in the next six months. Currently, 65 per cent of restaurants are operating at a loss, and only 19 per cent are breaking even. There are 250,000 restaurant employees out of work, and that could balloon to 600,000 people if more targeted aid is not given to the restaurant industry immediately.

The brutal reality for restaurants and other affected businesses is that the aid packages only really help businesses that are operating at 50 per cent of revenues or above; in the grey-zone lockdown, most restaurants have seen revenues drop between 80 to 100 per cent. The devil is in the details: the aid packages offered by both the federal and provincial government mean that restaurant owners are still on the hook for a large amount of their business expenses and taxes, and are often forced to advise staff to go on EI.

For example, the largest and most important aid program, the Canadian Emergency Wage Subsidy (CEWS), does not help business owners and their employees in the grey-zone lockdown in Ontario. Although the federal government boasted that they increased the wage subsidy back to 75 per cent, the new version now requires an employer to cover at least 25 per cent of employee wages. With little or no revenue coming in during lockdown, it is impossible for businesses to keep staff employed and pay at least 25 per cent of wages to receive the subsidy. Business owners face the agonizing choice to go further into debt to pay a portion of the salary of their cherished staff, or to lay off staff and put them on a much lower EI wage, forcing those employees into a poverty situation due to the high cost of living in the GTA.

This problem could be fixed if the federal government paid the first 75 per cent of the wage, as they did in the first wave, with the Ontario government topping up the last 15 to 25 per cent for the hardest-hit businesses in lockdown. This will keep employees working for a better wage in their current job, and out of the EI system that provides them less money in a month than the average rent in the GTA.

Business owners also face restrictions to other federal government programs. In the case of my family’s two restaurant businesses, we do not qualify for the Canadian Emergency Rent Subsidy (we own the buildings we operate in) or the $60,000 CEBA loan (our 2019 payroll is a little over $1.5 million). These restrictions are arbitrary and do not allow many desperate and deserving businesses to access these programs.

Perhaps the most egregious and crushing blow in this second wave is that the federal government has not mandated the big banks to defer business and personal loans to the people most affected by the lockdown. Even with record profits and stock prices in the third quarter, the big banks have refused to offer the same loan deferrals as in the first wave for the hardest-hit businesses and their employees, and the federal government has not stepped up again to force them to do so. This leaves business owners and employees on the hook for paying 100 per cent of their mortgage payments even though the government has shut down their businesses and jobs.

Solutions to these problems are quick and easy for the federal and provincial governments to implement: lift arbitrary restrictions to programs, increase the subsidies already in place, and mandate the big banks to give loan deferrals.

Loading...Loading...Loading...Loading...Loading...

Loading...

The economic recovery, if there is to be one, is dependent on the restaurants and small businesses most affected by lockdowns surviving until next summer. According to Restaurants Canada, the restaurant industry is Canada’s fourth-largest employer with 1.2 million people employed, 58 per cent of those are women, 50 per cent of owners are immigrants, and 31 per cent are visible minorities. Importantly, 95 per cent of restaurant sales go back into the economy in the form of jobs, food and beverage purchases, tax revenues, contributions to charity and more.

Businesses are comprised of people, and these people should not be forgotten. In lockdown, it is imperative for governments to stand up to the big banks, increase funding and lift restrictions of aid programs immediately – this will save tens of thousands of small businesses and jobs and show Canadians that we are truly all in this together.
Read more on Toronto Star
News Topics :
RELATED STORIES :
Business
OTTAWA Conservative Leader Erin O’Toole is calling for the Liberals to put a pause on federal audits of small businesses hit hard by COVID 19. He says too many small...
Sports
The Brass Taps Pizza Pub and Old Nick — two landmark restaurants on Danforth Avenue — have made the agonizing decision to close for good, highlighting a desperate need for...
Business
At Barcelona Tavern in downtown Calgary, founder Jeff Hanna is once again preparing to apply for government support to keep his business afloat during a COVID 19 lockdown. The local restaurant,...
Business
TORONTO Small businesses that survived the pandemic so far are now at risk of permanently closing if governments don’t do more to help them stay afloat in...
Sports
It was a veggie minestrone soup, packed full of the produce that would otherwise sit and rot in the fridge of his Ottawa restaurant, North & Navy, where he is...