Leslie and David have owned a successful restaurant for almost 20 years. But, as for everyone, COVID-19 has brought uncertainty and stress. There have been added costs associated with safety protocols and shrinking revenue tied to seating and capacity restrictions. Their insurance provider refuses to renew their policy and every new quote is 400 per cent higher than what they are currently paying.
A global supply chain collapse and a sustained drought is driving food costs through the roof. Like every other restaurant owner, they have taken advantage of low interest COVID-19 support loans which are now all coming due. They have also been forced to tie their personal assets to the business to gain access to additional financing.
They are considering closing a few days a week because they cannot find enough staff to keep the doors open. A mass exodus of talent has left a giant hole in the labour pool forcing never-seen-before bidding wars for experienced employees. All of this, while government subsidies are set to run out.
After two years of a sustained onslaught of challenges, they are faced with an impossible decision: dive further into debt or declare bankruptcy. Not only will they lose their business, but their personal assets and financial security are on the line — with potentially catastrophic consequences.
This story is one of many. It is mirrored across the hospitality landscape.
The pandemic has taken a heavy toll on Canadian small business owners, especially in the hospitality industry. In August 2021, StatsCan reported that more businesses had closed rather than opened for the first time since May 2020.
While there has been support for those who decided to soldier on through government subsidy programs, much of the financial shortfall has been offset by an increased debt load. As this debt now becomes due, many are still not seeing their revenues rebound enough to carry on.
Like Leslie and David, many restaurant owners have had enough and are throwing in the towel. To do this however, their only option is to declare bankruptcy, with potential dire consequences.
While business bankruptcies in the third quarter of 2021 recorded the lowest increases since 1987, these statistics do not capture those businesses owners who simply close the doors and walk away from their businesses — and creditors.
It’s crucial for Canada to develop graceful exit strategies for business owners. Entrepreneurs are in short supply, and we need them as part of a sustained economic recovery. Ideas for such measures could include agreements with banks not to enforce personal guarantees, establishing an office to support business owners through the process of winding down their businesses, and providing compensation for landlords in exchange for releasing tenants from long-term leases, to name a few.
Entrepreneurs and their families are going to suffer if they are unable to shut down their businesses without lasting impact on their own financial situations, not to mention the difficulties they will have starting much-needed new businesses.
Canadian small businesses have tried their best to keep the economy moving over the past two years. We, as consumers, have relied on their resilience and perseverance for our own survival.
It is only fair to support those, who — after almost two long years of fighting to survive — simply cannot do so any longer.
Rob Farrelly is the founder of GFV Financial Inc., which specializes in business intelligence solutions for breweries, bakeries and restaurants.