Restaurant owners in Atlantic Canada are asking the federal government to extend the repayment period for Canada Emergency Business Account (CEBA) loans, or risk restaurant closures this year. The time is now to offer repayment extensions, advocates argue, given many operators in the region are taking a hard look at their ability to repay and making decisions on the future for their businesses before the summer tourism season ramps up.

Operators say they’re struggling to squirrel away enough cash to repay their one-time federal loans on the set federal timetable, while having to manage significant hikes in their operating costs. With more than 20 locations, the owner of the Chef Inspired Group of Restaurants, chef Bill Pratt, told Atlantic Business Magazine food costs are the most obvious increased expenditure in the last couple of years.

“We’ve never seen prices like this. How does (cooking) oil go from $21 to $60? It takes two jugs for a fryer. They used to cost me $40, now it’s $120. But I’ve got to save $40,000,” he said, offering the simple example.

The price of raw goods comes atop increases in everything from energy bills, rent (Pratt had one location see an increase of 42% coming out of the pandemic), employee compensation in a challenging labour market, and higher insurance costs. It collectively affects prices charged to customers. Indeed, the latest Canada Food Price Report, a study produced as a collaborative effort of four universities led by Dalhousie University’s Agri-Food Analytics Lab, forecast a 6% to 8% rise in end prices for restaurants in 2022-2023. For the year prior, 2020-2021, the prediction was for a 3% to 5% increase, landing at 3.1%. The rising prices themselves become another challenge for restaurants, in terms of customer retention and total revenue.

“It’s very frustrating for a lot of owners, and they’re all panicked about it – we’re trying to keep our heads above water,” Pratt said. “How are we expected to save $40,000?”

 

CEBA help to pain

CEBA loans were a product of the COVID-19 pandemic, coming alongside support programs like the Canada Emergency Wage Subsidy and later, the Tourism Hospitality Recovery Program. The loans were a response to necessary public health restrictions that required businesses, including restaurants, to shut down completely at times. Without support for the business, separate from the staff, the businesses would have been without any income to cover costs and ended with bankruptcies. To help, CEBA offered interest free loans of up to $40,000, later hiked to $60,000 in an expansion of the program. The money was to be repaid with a set schedule to avoid interest costs.

The issue of repayment challenges for restaurants isn’t landing fresh on the plate for the industry or the federal government. Atlantic Business Magazine carried a feature story in its print edition this time in 2022 on how restaurants in Atlantic Canada managed to work through the peak difficulties of COVID-19 but were already worrying about their CEBA repayment schedule. When that feature ran, grocery costs were up. There were spikes in key restaurant items like propane and cooking oil.

In fairness, the federal government hasn’t been entirely unresponsive before now. At launch, the CEBA program included a partial loan forgiveness feature so that, should loan recipients pay back by the end of 2022, some of the loan would not have to be repaid. The exact amount depends on the size of the initial loan, but a $40,000 loan could see up to $10,000 forgiven, with the remaining $30,000 paid, amounting to significant savings for a small business. That deadline on repayment was ultimately extended, but only to the end of this year.

Now, given the realities of the last year, restauranteurs are saying the added year on that deadline just wasn’t enough. Instead of getting close to being able to repay CEBA loans this year, Restaurants Canada says bankruptcy filings in food service have increased 116 per cent. Surveys indicate as much as 80 per cent of restaurants in Canada are making less than they did pre-pandemic, with as much as half at breakeven or worse, in the lull before this summer season.

 

Time for extension is now: industry

A Restaurants Canada survey suggested nearly 20 per cent of restaurants that have yet to reimburse CEBA will not be able to repay in part or in whole on existing timelines. The industry organization says a decision now by the federal government to offer a 36-month extension will offer a predictable, known factor as businesses decide whether or not they want to go through the summer rush and see where they land.

The requested extension on repayments was included in a pre-budget submission by Restaurants Canada, though the government hasn’t moved since on its repayment requirements.

Restaurants Canada VP for Atlantic Canada, Richard Alexander, says the federal government has been listening. There just hasn’t been any movement to date.

“I don’t think they’re fully recognizing the extent to which this decision (on closures) will be made by the industry before the summer season,” he said.

 

 

Alexander pointed to the rural areas of Atlantic Canada where tourism is a primary industry and restaurants are a pillar of the tourism product. It’s not unusual for small communities to have only one or two table service restaurants and some of these restaurants may also operate only in the main tourism season, adding to the challenge of making enough hay for timely loan repayments. But if they disappear, it can have unique effects.

“I feel strongly that Atlantic Canada would be disproportionately more negatively impacted by the lack of a decision because of that,” he said.

For its part, as it states in response to frequently asked questions online, the federal government is no longer open to reviewing repayment terms on a business-by-business basis. The government also states it expects loans to be repaid by applicants, even if a business opts to close its doors for good (cutting off the option of someone avoiding payments by shutting down only to quickly restart fresh and CEBA debt free).

Just under $50 billion was approved for CEBA loans and the expansion offers, the vast majority in raw dollars flowing into the population centres of Ontario and Quebec. No province in Atlantic Canada had businesses receive more than two per cent of the total program funding. The highest was 16,028 businesses in Nova Scotia approved for about $855 million in financial support all-in, or roughly 1.77% of the national program’s total. In all, just over 40,000 businesses in Atlantic Canada were approved for CEBA support, with restaurants only a portion of the totals.

 

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