Small-business owners need help to bow out gracefully

Leslie and David have owned a successful restaurant for almost 20 years. But, as for everyone, COVID-19 has caused them uncertainty and stress. Safety protocols have added to their costs, and seating and capacity restrictions have shrunk their revenue. Their insurance provider refuses to renew their policy, and each new quote is 400 per cent higher than the one before.

A global collapse of the supply chain and a sustained drought are driving food costs through the roof. Like all other restaurateurs, they’ve taken advantage of low-interest COVID-support loans, which are now all coming due. They’ve also been forced to tie their personal assets to the business to get additional financing. 

They’re considering closing a few days a week, because they can’t 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 a two-year onslaught of challenges, they now have an impossible decision to make: sink further into debt or declare bankruptcy. Not only will they lose their business; their personal assets and financial security are on the line — with possibly catastrophic consequences.

This story is one of many in the hospitality sector.

The pandemic has taken a heavy toll on Canadian small-business owners, especially restaurants like Leslie and David’s. In August 2021, Statistics Canada reported that, for the first time since May 2020, more businesses closed than opened.

While the government has offered subsidies to those who’ve decided to soldier on, they generally cover a mere third of expenses, so businesses have been forced to take on even more debt. As this debt now becomes due, the revenues of many businesses aren’t rebounding enough for them 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, which can have dire consequences. 

While the increase in bankruptcies in the third quarter of 2021 was the lowest since 1987, the numbers don’t capture owners who simply close the doors and walk away from their businesses — and their creditors.  

It’s crucial that Canada develop graceful exit strategies for business owners. Entrepreneurs are in short supply, and we need them as part of a sustained economic recovery. Such measures could include: agreements with banks not to enforce personal guarantees, an office to help owners through the process of winding down their businesses, and compensation for landlords in exchange for releasing tenants from long-term leases, to name a few. 

Entrepreneurs and their families will suffer if they can’t shut down their businesses without suffering lasting harm to their own finances, not to mention the difficulties they’ll have starting much-needed new businesses.

Canadian small businesses have tried their best to keep the economy moving over the past two years. As consumers, we’ve relied on their resilience and perseverance for our own survival. It’s only fair to support those, who — after almost two long years of fighting to survive — simply can’t go on. 

Rob Farrelly is the founder of GFV Financial Inc., which specializes in business intelligence solutions for breweries, bakeries, and restaurants.

The views, opinions and positions expressed by all iPolitics columnists and contributors are the author’s alone. They do not inherently or expressly reflect the views, opinions and/or positions of iPolitics.

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