Are the Federal Measures Enough to Support Restaurants During the COVID-19 Crisis?

Restaurants and other small businesses are worried about the next few months. As many restaurant owners contemplate shutting their doors for good, it’s clear that the COVID-19 outbreak has had a particularly devastating impact on the food industry. What is the federal government doing to support Canadian restaurants through these highly uncertain times?

On March 27th, the Prime Minister announced a set of new measures to support small businesses through this crisis and beyond. This announcement was part of Canada’s COVID-19 Economic Response Plan, which has put forth billions of dollars in an effort to protect the lives and livelihoods of Canadians during these difficult times.

Are these relief measures enough for restaurants to survive the challenges they’re facing? Let’s take a look at three measures that the Canadian government has implemented in response to COVID-19.

1. 75% Wage Subsidy

As of March 2020, the federal government has provided a 75 percent wage subsidy to all companies that have lost 30 percent of its gross revenue in the wake of the COVID-19 pandemic. The subsidy is meant to discourage business owners from laying off workers as a result of financial hardship.

Companies are expected to prove that their revenue this time last year was 30 percent less than it is presently. The subsidy is not exclusive to small businesses, and it doesn’t matter how many staff are on payroll. Nonprofits and charities are also eligible to apply.

The subsidy is set to cover annual earnings up to $58,700 — the maximum amount an employee can receive is $847 a week. Business owners always have the option of paying workers the last 25 percent of pre-crisis earnings.

2. Guaranteed Bank Loans of up to $40,000

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The program is officially titled the Canada Emergency Business Account, and it promises to provide small businesses and not-for-profit organizations with interest-free loans of up to $40,000. As many Canadian businesses are currently faced with little to no revenue, the loan is meant to cover operating costs during these times of unprecedented uncertainty.

The loans will be interest-free for the first year, and up to 25 percent (a maximum of $10,000) will be forgiven if the rest of the loan is paid back on time. In order to qualify, companies are required to demonstrate that they had a total payroll of more than $50,000 but less than $1,000,000 in 2019.

While the 75 percent wage subsidy was generally met with gratitude, many Canadian small business owners were skeptical of relief coming in the form of loans. While loans may be a more viable option for businesses that are well-capitalized, it’s not uncommon for small businesses to carry existing debt.

Despite the loans being interest-free, taking on more debt during times of financial hardship is an uncomfortable decision for many restaurant owners, especially because customers are unlikely to make up for their temporary non-patronage once the lockdown is lifted.

The Canada Emergency Business Account program is expected to roll out in the middle of April, and businesses interested in applying should seek out eligible financial institutions.

3. Business Credit Availability Program

The Business Development Bank of Canada (BDC) and Export Development Canada (EDC) are providing $40 billion of additional support mostly targeted towards small- and medium-sized businesses. The program is meant to improve access to financing for Canadian business owners in a variety of sectors, including air transportation and tourism.

Through EDC, small- and medium-sized enterprises can receive cash flow term loans of up to $6.25 million. The BDC is offering to co-lend term loans to finance daily business operations. Both are working with select financial institutions.

4. Delayed GST and HST Payments and Income Taxes

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Federal Goods & Services Tax (GST) and Harmonised Sales Tax (HST) returns and payments have been postponed for the months of March, April, and May until the end of June of this year. The same can be said for any duties and import taxes that become payable. All of these payments would have normally been due to the CRA and Border Services at the end of March.

The CRA is also allowing all businesses to defer the payment of any income tax amounts that have become owing since March 18th or will become owing prior to September of this year. Tax balances and installments can now be paid after August 31st without penalty or accumulated interest.

What Does the Future of the Food Industry Look Like?

Restaurant owners were one of the first business owners to feel the effects of the outbreak — and the industry as a whole has been one of the most affected. Currently, 10% of restaurants have shut their doors permanently, and many others may be headed down the same path.

On behalf of Canada’s 90,000 food service establishments, all levels of government have responded in an effort to relieve some of the economic impacts of the COVID-19 pandemic. But the potential for devastation remains clear if drastic measures aren’t put in place.

While takeout and delivery services are on the rise, many restaurants will likely need much more support to stay afloat. It’s high time for governments to introduce measures like grants and rent freezes rather than loans.

CHI Real Estate is committed to supporting local restaurants. Get in touch by clicking here or by calling 647-347-9723.

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