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One in five restaurants in Canada at risk as CEBA deadline looms, say advocates

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The food service industry could be decimated by a wave of closures if the federal government does not extend the Jan. 18 deadline for the repayment of loans under the Canada Emergency Business Account program, two industry groups are warning.

Restaurants Canada, a not-for-profit association advocating for the food service industry, said Jan. 8 that the looming deadline could prove disastrous for the sector, which has been operating under the strain of debts incurred during the pandemic as well as other economic factors beyond its control.

“Immediate action is essential to prevent further closures and ensure the long-term survival of this critical sector, which contributes significantly to the nation’s economy,” the association said in a press release.

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We are not asking for a handout; we are asking for more time

Restaurants Canada

The call was echoed by the Canadian Federation of Independent Business (CFIB), which advocates on behalf of more than 97,000 small businesses.

According to a CFIB survey, nearly one-fourth of those who received loans through the Canada Emergency Business Account (CEBA) are likely to miss the repayment deadline.

If small businesses fail to repay the loan on time, or if they haven’t arranged a refinancing extension with their bank, they will forfeit the chance to have up to $20,000 of the loan forgiven. Additionally, they will start incurring interest on the remaining principal amount.

The federal government has maintained the original CEBA loan repayment deadline of Jan. 18, 2024, despite persistent appeals by businesses for an extension.

Dan Kelly, chief executive of the CFIB, said the government’s hasty distribution of loans during the pandemic has led to ongoing confusion among small business owners.

“I think at the beginning of the process, these things were put together superfast because they were pandemic supports. The government wanted to get money out there to keep businesses afloat during the early days of the pandemic, so it’s not a surprise that they tightened some of the rules as they went,” Kelly said.

However, about 50,000 of the 900,000 loan holders were declared ineligible and Kelly said the government has been “terrible in providing information to businesses, making many decisions at the absolute last minute.”

“In December 2023, numerous businesses discovered through a bank letter that they were never eligible for the forgivable portion of their loan and now had to repay the loan in full within a shorter deadline,” he said. “The sad part is that whether the business was eligible or not, they spent the money, what are they going to do?”

Even for the 40,000 CEBA loan holders who were eligible meeting the deadline remains a challenge.

“We’ve been calling for a year extension to the Jan. 18 deadline, but the government has unfortunately refused to do it,” Kelly said.

According to Kelly, one in five restaurants in Canada are at risk of not surviving.

A Restaurants Canada survey, meanwhile, found that 53 per cent of restaurants are currently operating at a loss or barely breaking even, a significant rise from just 10 per cent before the pandemic.

Four major tax hikes scheduled for early 2024 will add to the financial burden small businesses face.

Employment insurance (EI) and Canada Pension Plan (CPP) premiums increased on Jan. 1. Payroll taxes for workers will rise by about $348 and for employers by about $366 per employee in 2024. Employers could pay up to $5,524 per employee for the CPP and EI changes, not including other possible payroll taxes.

On April 1, the carbon tax will also go up to $80 from $65 per tonne, and the alcohol excise tax will adjust to inflation, about 3.5 per cent, unless the government decides otherwise.

The CFIB has advocated for the suspension of the tax hikes.

“Recovery in the food service industry has been painfully slow because of several factors beyond the control of restaurateurs, including record high inflation, the rising cost of food, and labour shortages,” Restaurants Canada said in its press release. “We are not asking for a handout; we are asking for more time.”

• Email: shcampbell@postmedia.com

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