A grassroots coalition of small businesses across Canada, united in its opposition to a debt-forward solution to the COVID-19 economic crisis, has issued a dire warning about the state of those businesses as they face paying rent on April 1.
A recent survey by SaveSmallBusiness.ca found that 75.7 percent of small businesses report a drop of 80 to 100 per cent in revenue and another 11.2 percent report a decline of 60 to 80 percent.
The survey found that 37.9 percent will not be able to pay April rent, while an additional 32 percent will be able to make April, but not May. Therefore 69.9 percent of respondents will be in default of their tenancies by May 1.
The organization’s website was started on March 22 by seven small businesses from different sectors: The Discourse, Social Capital Partners, Impact Bridge, Dageraad Brewing, Sun Peaks Independent News, Tangent Cafe, and Iskwew Air. Less than 24 hours later, more than 2,500 small businesses had joined this movement.
The website is managed by The Discourse, a digital news media company in Vancouver.
Jon Shell, Managing Director & Partner of Social Capital Partners in Toronto, and co-founder of the movement, said recent announcements by the federal government to support small business have received significant praise.
Increases to wage subsidies, more generous loans, and deferral of sales tax collection will all help many companies. But local small businesses – “main street” businesses – will likely not benefit from these supports. These businesses, forced in many cases to close in order to protect their communities from the COVID-19 public health crisis, have largely laid off their staff. They have also expressed limited interest in taking on additional debt, on any terms, as indicated by the almost 22,000 businesses who have signed a petition at savesmallbusiness.ca.
“We’ve been advocating for a program that would cover some of the fixed costs of main street businesses or they’re all just going to shut,” said Shell.
“The solution the government has right now is this loan program but people just can’t sign loan agreements. A lot of them English is a second language, they’re not financially sophisticated, they’re barely getting by as it is, their lawyers and accountants are not available. And then we’re asking banks who can’t even handle mortgage deferments, how big is their back log, to roll this thing out in time to save small business.
“Our proposal is a landlord-friendly proposal. We put a proposal that doesn’t require legislation where the federal government can pay money directly to landlords to fund a portion of rent during the next three months. It allows the landlords a framework to work with their tenants to get through this. They don’t get all their money but they get a lot of it.”
The organization recommends the following:
That the federal government directly provides aid to commercial landlords in order to provide a financial incentive for them to voluntarily reduce or waive rent for their tenants;
That provinces be encouraged to put a moratorium on commercial lease lockouts, preventing landlords from locking out tenants on April 1 while the implementation of this strategy is developed;
That all levels of governments put significant public pressure on banks to defer property debt principal payments without accruing interest;
That the federal government works with provinces and municipalities to agree on a property tax and utilities abatement strategy for April, May and June; and
That the federal government announces the framework of a rent abatement strategy prior to April 1 in order to avoid significant confusion and mass lock-outs of businesses on that date.
According to the organization, small businesses generate more than a third of Canada’s GDP.
“Across the country, many of our small businesses have closed their doors, and many more will follow in the coming months. We’ve seen dramatic drops in sales and disruptions to our supply chains as a result of the measures we’re all taking to stop COVID-19,” says the group on its website.
“We’ve paused our businesses to protect our communities’ health. Government needs to help us pause our expenses so we’re still in business when it’s time to restart the economy. The answer isn’t more access to debt. We shouldn’t have to mortgage our future to pay for our collective response to this virus. We’re willing to pay our share, but we need banks, landlords and the government to equitably share the burden. We’ll lose thousands of small businesses if measures aren’t taken.”