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Restaurants Canada, a national association representing the food service sector, warned Monday of “devastating consequences” for the industry if an extension is not granted to the Canada Emergency Business Account (CEBA) repayment deadline, which is less than two weeks away.
“Your favorite mom and pop restaurant and local gathering place is at risk,” Kelly Higginson, president and CEO of Restaurants Canada, said in a press release.
“If what the industry is telling us comes to fruition, Canadian communities will lose something very special, simply because of an arbitrary deadline.”
In an interview with BNNBloomberg.ca, Higginson said that according to Restaurant Canada data, 53 per cent of food service operators in Canada are either operating at a loss or barely breaking even.
Before the pandemic, that number was just 12 per cent, Higginson said.
“While the pandemic is behind us, the impact for the restaurant industry is far from over,” she said.
WHAT ARE CEBA LOANS AND WHEN IS THE DEADLINE?
The CEBA program offered interest-free loans of up to $60,000 to small businesses and not-for-profits impacted by the COVID-19 pandemic. Nearly 900,000 organizations applied for and received a loan over the course of the program.
The repayment deadline, which was originally Dec. 31 2022, has been extended multiple times. The current repayment date is set for Jan. 18.
Up to one-third of a business’ loan can be forgiven if they are able to pay the remaining outstanding amount by that date.
Businesses that miss the deadline will lose out on the forgivable portion and see their debts converted to a three-year loan with interest of five per cent annually.
CALLS FOR EXTENSION
For months, businesses have been asking for another year-long extension of the loan-forgiveness deadline, but so far the government has not indicated that they’re considering it.
In their press release, Restaurants Canada said its members are facing “limited options to avoid bankruptcy” if the deadline isn’t pushed back.
“It’s not just food, not just wages, not just rent or insurance – every single aspect of running a restaurant has dramatically increased in cost and they haven’t been able to pass that on to their to their guests,” Higginson said.
“It’s been a very challenging three or four years and it’s been constant headwinds.”
Restaurants across Canada were affected by shutdowns and other restrictions during the height of the COVID-19 pandemic as governments introduced measures to reduce the spread of the disease.
Higginson said these measures “disproportionately” affected the food service industry, which already operates with tight margins in the best of times.
“There wasn’t a lot of wiggle room going into that challenging period,” she said.
Higginson said pandemic labour challenges have subsided slightly, “but the sales aren’t there … and then when the sales are there, it’s just not coming down to the bottom line.”
GOVERNMENT RESPONSE
The federal government announced this fall that businesses will have until the end of 2026 to pay off their principal CEBA loan amounts, if they do not meet the January deadline. In the meantime, they will only be required to make payments on the interest.
If a business with a CEBA loan still has not repaid it by the end of 2026, the loan will be referred back to the Canada Revenue Agency (CRA) and dealt with on a case-by-case basis.
“The bottom line is that, if you are a small business and do not currently have the funds to repay your CEBA loan, you now have three years to repay it in full,” Katherine Cuplinskas, senior communications advisor for Finance Minister Chrystia Freeland, said in a written statement.
“The additional flexibility that we announced (this fall) is significant support for small businesses who might still be struggling to make ends meet.”
‘KEEP UP THE FIGHT’
The Canadian Federation of Independent Business (CFIB) said in a December blog post that it will “keep up the fight” for an extension until the last minute.
The CFIB had collected more than 55,000 petition signatures in support of an extension as of Dec. 13. Its efforts gained the support of politicians from various political stripes, as well as all 13 of Canada’s premiers.
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