In a desperate bid to prevent widespread closures within the Canadian restaurant industry, Restaurants Canada, a national association for the food service sector, is urgently appealing to the government for an extension to the looming repayment deadline for pandemic small business loans.
The dire warning comes less than two weeks before the Canada Emergency Business Account (CEBA) repayment deadline, currently set for January 18. Restaurants Canada's President and CEO, Kelly Higginson, emphasized the potential "devastating consequences" for the industry if the deadline is not extended.
Highlighting the gravity of the situation, Higginson stated, "Your favorite mom and pop restaurant and local gathering place is at risk. If what the industry is telling us comes to fruition, Canadian communities will lose something very special, simply because of an arbitrary deadline."
Challenges Faced by the Restaurant Industry
According to Restaurants Canada data, 53 percent of food service operators in Canada are either operating at a loss or barely breaking even, a stark contrast to the pre-pandemic figure of 12 percent. While the pandemic may be officially behind us, the restaurant industry continues to grapple with its aftermath.
The restaurant sector, known for operating on slim profit margins even in favorable times, has been hit hard by a myriad of challenges. Shutdowns and restrictions during the height of the COVID-19 pandemic disproportionately affected the industry, leading to financial strain.
Higginson explained, "It's not just food, not just wages, not just rent or insurance – every single aspect of running a restaurant has dramatically increased in cost, and they haven't been able to pass that on to their guests."
The CEBA Loan Program and Repayment Deadline
The CEBA program initially provided interest-free loans of up to $60,000 to small businesses and not-for-profits impacted by the pandemic. While the repayment deadline was originally set for December 31, 2022, it has been extended multiple times. Currently, the looming deadline of January 18 is causing heightened concerns within the industry.
Up to one-third of a business's loan can be forgiven if they manage to pay the remaining outstanding amount by the deadline. However, businesses missing the cutoff risk losing out on the forgivable portion, with their debts converting to a three-year loan with an annual interest rate of five percent.
Calls for an Extension and Government Response
Businesses have been persistently calling for a year-long extension of the loan-forgiveness deadline. However, the government has not shown any inclination to consider such an extension. In response, Restaurants Canada warns that its members are facing "limited options to avoid bankruptcy" without a deadline extension.
The Canadian Federation of Independent Business (CFIB) has been actively advocating for an extension, collecting over 57,000 petition signatures as of January 9. The federal government did announce an extension until the end of 2026 to pay off principal CEBA loan amounts if the January deadline is not met. Until then, businesses are only required to make interest payments.
In the midst of these challenges, the plea from Restaurants Canada and other business groups is a stark reminder of the ongoing struggles faced by the Canadian restaurant industry. As the clock ticks down to the critical January 18 deadline, the fate of countless small businesses hangs in the balance, relying on government action to secure their survival.
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