One in five restaurants with a pandemic loan at risk of closing as repayment deadline looms

It is not, said restaurateur Erik Joyal, the ideal time to be paying off tens of thousands of dollars in debt. "We'll do it, but it's going to hurt," said Joyal, president of Ascari Group, which owns three restaurants, including Ascari Enoteca, Gare de l'Est Brasserie and new addition Abrielle at Sutton Place Hotel.

Like many other businesses, Ascari is facing a key Jan. 18 deadline to backed by the federal government. Thousands of restaurants are struggling to find the money, and the situation is so dire that in a recent Restaurant Canada survey, one in five of the association's 27,500 independent members said they'll likely close at least one location because of the CEBA repayment.

Under the Canada Emergency Business Account program, the government guaranteed up to $60,000 in loans to eligible businesses, with $20,000 of that amount forgivable if the rest was paid off on time. The loans were provided by banks, but guaranteed by the government. (Joyal said Ascari has paid off CEBA loans for two of its businesses and plans to meet the Jan.

18 deadline for its other two CEBA loans.) While the original deadline of Dec. 31, 2022, has been extended twice, the government has signalled that it . Businesses that don't pay two thirds of the loan back by Jan. 18 will be allowed an extra two months to refinance it, but must pay the full amount by Dec.

31, 2026, rather than having a third of it forgiven. A spokesperson for federal Finance Minister Chrystia Freeland said the government has already shown substantial flexibility, including two deadline extensions to qualify for partial forgiveness, as well as adding an extra year to the repayment deadline for companies who needed to refinance.

“The bottom line is that, if you are a small business and do not currently have the funds to repay your CEBA loan, you now have three years to repay it in full," said spokesperson Katherine Cuplinskas, noting that refinanced loans will be charged five per cent interest. "The CEBA program, which delivered over $49 billion to nearly 900,000 small businesses and non profits across the country, was an essential part of the federal government’s swift response to the COVID 19 pandemic.

The additional flexibility that we announced is significant support for small businesses who might still be struggling to make ends meet.” In an industry that was among the hardest hit by lockdowns, paying back even part of the CEBA loans right now is a hardship, said Kelly Higginson, CEO of Restaurants Canada.

“They came out of the pandemic with heavy debt. And then it’s been heavy headwinds ever since. The cost of doing business is through the roof," said Higginson, adding that Restaurants Canada data shows that up to 4,000 restaurants across the country could be at risk of closing because of the upcoming deadline.

It is, said Higginson, the last straw after a long line of struggles, including COVID lockdowns, the trend hitting downtowns, the rising cost of food, a slumping economy, as well as interest rate hikes leaving Canadians with less disposable income. "There are all of these things making a big impact, and at some point, these operators have to pull the chute," said Higginson, who called on the federal government to extend the payment deadline to qualify for partial forgiveness to the end of this year.

“We’ve been given a hard no. But I’m always optimistic that as the government is able to collect more information on who’s paying back their loans and who has loans outstanding, that their thinking will change," said Higginson. Joyal agreed that many restaurant operators may well decide to close up shop.

“Without a doubt this is going to be the tipping point for a lot of places," said Joyal. “The kind of places this is going to hurt the most are the small, independent neighbourhood spots.” The impact, Higginson said, will be felt in every single province and territory. “These numbers of restaurants closing is going to impact every single community across this country," said Higginson..