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Small businesses hopeful federal government will retool loan program to cover mounting rental costs

Small Business Minister Mary Ng.
Small Business Minister Mary Ng.

OTTAWA — Some industry representatives are hopeful that Ottawa will retool a key COVID-19 loan program to help small business owners cover rental costs, as retailers, restaurants and others begin to buckle under mounting piles of debt.

In meetings with Finance Minister Chrystia Freeland and Small Business Minister Mary Ng in recent weeks, lobby groups have been pressing for alterations to the Canada Emergency Business Account (CEBA) that would help owners cover major costs like rent. Some see the changes as a potential replacement to the Canada Emergency Commercial Rent Assistance (CECRA), a rent relief program largely seen as a flop in the private sector after uptake fell well short of projections.

Ottawa is poised to make some form of changes after the Liberal government announced in its speech from the throne on Wednesday that it would expand CEBA to “help businesses with fixed costs,” though it provided no further details. A spokesperson for minister Ng did not clarify how CEBA might be adjusted or expanded.

Dan Kelly, head of the Canadian Federation of Independent Business (CFIB), says changes to the loan program would provide companies with a crucial lifeline as they head into the winter months. Restaurants are fretting about their bottom lines as patios begin to shut down, while brick and mortar retailers worry that the Christmas shopping season will be entirely dominated by e-commerce giants.

Kelly has been in talks with Freeland about potentially offering retroactive rent relief to companies, who for months have been deferring payments in hopes that economic activity will spring back. Many now face insolvency as the pandemic drags on.

“They’re not going to be able to outrun their debt,” he said.

He said CEBA provides a good vehicle to provide rent relief because it puts money directly in the hands of owners, rather than calling on commercial landlords to sign off.

“The rent subsidy is a disaster, and it needs a new approach,” he said. “The big flaw with CECRA was that it required the landlords’ participation, and very few landlords did participate in the end.”

Despite lower-than-expected uptake in the program, Ottawa extended CECRA in early September for one month, after numerous businesses warned that their revenues were still far too low to cover commercial rent costs.

Ottawa has backed $30 billion in CEBA loans as of Sept. 24. The program provides guaranteed loans of up to $40,000 to small businesses, and is administered through financial institutions. Loan recipients can recoup 25 per cent of the loan if it is paid back within a certain time frame.

Not all industry groups are on board with using CEBA as a vehicle to deliver rental assistance.

“From the perspective of our members, using CEBA to cover commercial rent costs is a non-starter, primarily because small and main street businesses will be reluctant to take on CEBA debt for commercial rent if they believe commercial activity and revenue will remain low,” Trevin Stratton, lead economist at the Canadian Chamber of Commerce, said in a written statement.

The rent subsidy is a disaster, and it needs a new approach

But Kelly remains hopeful Ottawa will introduce the changes. He says there has been a “dramatic change” in Finance Canada’s receptiveness to the proposal since Freeland replaced Bill Morneau, the former minister who crafted the undersubscribed CECRA program.

“He was in love with his own model for rent support,” he said. “She’s looking at it with fresh eyes.”

The Liberal government has made several adjustments to the CEBA in recent months, after business owners continued to express frustration with the program.

Among the complaints is that companies that operate through a personal bank account, as opposed to a commercial one, have been unable to apply for CEBA, largely due to concerns that banks cannot properly assess their ability to pay back the loans. Many small firms like barber shops, contract workers and restaurants run their business through personal accounts, typically because their overall number of bank transactions do not necessitate business accounts.

On May 21 minister Ng told a House of Commons committee that her office was working “as quickly and as fast as we can go” to provide access for firms with personal bank accounts. It has not yet introduced the adjustment.

In its announcement for a new Black entrepreneurship program on Sept. 9 the Prime Minister’s Office again acknowledged that businesses operating through personal accounts “have so far been unable to apply,” and promised changes.

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Copyright Postmedia Network Inc., 2020

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