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Small businesses feeling effects of COVID-19

Federal, provincial governments looking to keep employers and workers afloat

After a slower-than-anticipated 2019 summer wedding season, Kathryn Watters of Pemberton-based Cheese Box Photo Booth was sensing a bounce back coming in 2020.

But, on March 12, as Watters waited with her daughter to board a plane for a quick spring break visit to Ontario, the dominoes began to fall. With the provincial announcement that day that gatherings of more than 250 people were banned, the Whistler Blackcomb (WB) length-of-service awards planned for the following week—a staple of Cheese Box's calendar—was suddenly off. As Canadians started to realize the severity of the COVID-19 pandemic, they postponed or cancelled weddings, while school closures meant planned grad and prom events disappeared.

"It happened pretty much all at once," she said. "This is going to take a toll, probably, through the entire summer. Who knows how long this is all going to go on for?"

While Watters has minimal overhead costs, she recently invested in printing supplies coming from the United States that are going to collect dust.

"That just cost me a small fortune and I don't know that I'm going to need them right away," she said, adding that she is still paying off the cost of a second booth.

Watters started Cheese Box in 2013, and while she anticipates being eligible for the federal programs, it's admittedly a worrisome time.

"I'm obviously worried financially about making ends meet with no revenue coming in," she said. "There are a lot of people out there that are a lot worse off than I am, but I wasn't prepared for this at all.

"It's going to be a pretty big hit, so thank God for my line of credit."

Watters was one of more than 22,000 small business owners who shared her story to the website this month. Several other local respondents, operating in fields from retail and restaurants to health-and-wellness services and home cleaning, were worried that they wouldn't be viable much longer without a boost from government.

Jacki Bissillion of Whistler and Squamish Personnel Solutions, meanwhile, said her business has dropped by 90 per cent, noticing a decline in early March and pinpointing the closure of Whistler Blackcomb as the moment things started to nosedive as businesses—primarily in the hospitality and tourism sector—have stopped hiring full-time and temporary workers.

"We were set for a very successful year," she said, noting the business typically sends hundreds of people to temporary jobs per week. "We are at the centre of the economy: when the economy's booming, we're booming and when the economy's quiet, we're quiet."

At this point, the business has had to lay off more than 300 temporary workers and much of its core staff of 10.

While Bissillion has been impressed with the government response, including a recent Whistler Chamber-led teleconference with MP Patrick Weiler and MLA Jordan Sturdy (see below), as well as the community response, the uncertainty of how business can withstand the effects of a prolonged shutdown is "terrifying," especially locally.

"Lots of businesses are going to really struggle, including my own, if this situation doesn't rectify soon," she said. "It's scary."

Bissillion hopes to tap into a pair of recently announced federal initiatives, including the wage subsidy and Canada Emergency Response Benefit, but in her discussions with government, she has been told that they're not quite ready to go ahead. She understands why it's taking time to implement the programs, and while she feels relief that help is coming, she's "antsy" that it's not here yet.

Bissillion is confident she'll personally be able to tread water for now and is more focused on accessing the programs to provide as much help to her staff as possible.

"I've been spending most of my time making sure they're OK mentally and financially, making sure that they can pay rent and that they don't lose their truck and that they can put food on the table," she said, adding the company hopes to tap into the small-business loans to re-loan to its staff.

She also fears for her clients, many of whom are friends and staples of the community.

"They've done so many great things for our community beyond just providing paycheques," she said.

Weiler, Sturdy provide clarity in Chamber teleconference

In a teleconference organized by the Whistler Chamber of Commerce on March 30, Weiler and Sturdy provided an update on what the federal and provincial governments, respectively, were doing to help.

After short recaps of existing plans, the pair took about an hour answering each of the roughly 50 questions posed by attendees and moderated by Chamber CEO Melissa Pace.

Weiler said the federal government is in the process of developing stimulus plans for several industries, including tourism, though details were not yet available.

He also recapped the initiatives the government had already put in place including:

• Waiving the waiting period for the employment insurance (EI) program;

• Planning a top-up of the GST tax credit of $400 for individuals and $600 for couples in May;

• Planning a one-time top-up of the Canada Child Benefit of $300 per child to be part of the May payment;

• Providing Export Development Canada (EDC) and the Business Development Bank of Canada with $12.5 billion to help small businesses solve cash-flow issues, including loans of up to $6.25 million from EDC;

• Deferring GST remittances and customs duty payments until June 30 and business income tax payments are deferred until Sept. 1;

• Implementing a six-month moratorium on student-loan payments; and

• Working with the country's six largest banks on mortgage-payment deferrals of up to six months—acknowledging that implementation has been "patchy"—while making the deferrals automatic with Canada Mortgage and Housing Corporation shared-equity mortgages.

In terms of programs to help business owners, Weiler detailed the Canada Emergency Response Benefit (CERB), which was first announced on March 25, and the 75-per-cent wage subsidy and Canada Emergency Business Account (CEBA), first announced on March 27, both given some additional clarity on March 30 by Prime Minister Justin Trudeau. While Weiler answered as many questions as possible from Chamber members, he said more details would be forthcoming from Finance Minister Bill Morneau, who provided more details in an April 1 press conference.

What is certain is that CERB is meant for people who fall through the cracks of EI and will be administered by the Canadian Revenue Agency (CRA). The benefit provides $2,000 a month for up to four months for those who must stop work due to COVID-19 and have no other income; are sick, quarantined or are taking care of someone who is; are a parent who must stay at home from work to take care of children; or are still employed but not being paid. Those who have been without income for two weeks and earned at least $5,000 in either the past 12 months or the last calendar year are eligible.

"The idea behind it was to make this as simple and as quick as possible so that we can get money into people's hands," Weiler said. "You are making that commitment, so there could be checks later on."

As for the CEBA, businesses and non-profits with payroll between $50,000 and $1 million are eligible for an interest-free loan of up to $40,000. If the business pays back by the end of 2022, 25 per cent is forgivable.

Weiler confirmed that businesses such as restaurants are eligible.

Meanwhile, with regard to the $71-billion wage subsidy, Weiler confirmed that the federal government would provide up to 75 per cent of an employee's wage up to $58,700, which works out to $847 per week, for three months retroactive to March 15. Eligible companies must file an attestation form with the CRA declaring that they have experienced at least a 30-per-cent drop in revenues compared to the same month last year. Morneau said businesses will be able to apply through a portal posted in the next three to six weeks, and must apply each month. In order to receive funds as quickly as possible, businesses that do not have direct deposit set up with the CRA are encouraged to do so.

The federal government initially announced a 10-per-cent wage subsidy, but quickly revised it after receiving feedback from the business community.

"There was a big pushback that this wasn't going to be enough," Weiler said.

He confirmed that non-for-profit organizations are eligible, and there will be no expectation that qualifying organizations reimburse the government.

When asked about how businesses that had not yet reached the 30-per-cent threshold, but were projected to, would be handled, Weiler said he was not yet certain.

In terms of businesses that had not reached the 30-per-cent threshold, but were projected to, or new businesses that don't have qualifying data from 2019, or not-for-profits—such as food banks—that have seen need go up without revenues dropping sharply, Morneau said the system will look to be as flexible as possible. Details will come in "the near term," he said.

"We're coming up with programs that in a regular time period might take a year or a couple of years to develop and we're developing them in the course of a week," he said. "We will get the administrative details out as quickly as possible."

Employers will only be expected to top up as much of the remaining 25 per cent as they are able, with Morneau reinforcing that while the system is currently based on trust in order to allow access that's quick and easy as possible, any abuse will not be tolerated.

"There will be severe consequences for any bad actor who tries to abuse this system," he said. "If, in this time of crisis, anyone attempts to use this money for fraudulent purposes, they will face severe penalties."

Weiler also encouraged employers to look into a work-sharing program intended for full-time workers in organizations that have been active for at least two years and are seeing a decrease in business activity for reasons out of their control, such as COVID-19. Either businesses or employees can apply. If an employee's hours have been reduced, the employee can qualify for EI for the days that they are no longer working. Seasonal employees, however, are not eligible, Weiler clarified.

Provincial plans

Meanwhile, Sturdy said the provincial government is working to align its programs with its federal counterparts in order to make access as simple as possible.

"The province is trying to find a way to dovetail in to the federal programs," Sturdy said. "It's obviously very much a moving target, trying to be responsive, recognizing of course that the provincial economy is significantly smaller and the provincial budget is significantly smaller than the federal budget, although we do have to solve our unique problems in British Columbia."

With that in mind, Sturdy detailed the $5-billion provincial plan, which provides $2.8 billion for people and $2.2 billion for business. The biggest slice of the pie is $1.7 billion for critical supports such as healthcare, social assistance programs, housing, First Nations health authorities, and support for licensed daycares.

Among the individual measures are:

• Making a one-time payment of $1,000 for individuals who are eligible for some federal programs such as EI and CERB;

• Deferring BC Hydro and ICBC bills, while also creating a BC Hydro crisis grant of up to $600 for those already in arrears;

• Halting housing evictions and passing legislation ensuring no worker permanently loses a job because of the pandemic;

• Providing United Way of the Lower Mainland with $50 million to distribute for seniors' support services around the province;

• Increasing the climate action tax credit for moderate- to low-income families for the July payment;

• Providing $3 million to food banks;

• Deferring tax filings for the Employer Health Tax, carbon tax, motor fuel tax, Municipal and Regional District Tax, provincial sales tax and the tobacco tax until September while delaying implementation of new taxes such as the Netflix tax, sugary-drinks tax and carbon-tax increase; and

• Reducing property taxes for Class 4, 5 and 6 industries by 50 per cent.

"It's important to make sure that your employees are registering or at least being part of the EI program for the emergency support and benefit program or the emergency care benefit program so that you're tied into the system. It will dovetail with the provincial opportunities," Sturdy said. "Government intends to get the money out to people as soon as possible, although that will probably be in association with the federal deliveries."

B.C.'s minimum wage, meanwhile, is set to increase from $13.85 to $14.60 per hour on June 1. While Sturdy said pushing back the raise has been discussed, there's little clarity yet on whether such a move will be implemented.

On April 1, meanwhile, the province announced that small businesses (defined as commercial customers under BC Hydro’s Small General Service Rate as of March 15) forced to close by COVID-19 would receive up to a three-month payment holiday for April, May and June.

Sturdy added that $1.5 billion has been earmarked for the recovery process, including $20 million for tourism and culture, though details aren't yet fleshed out.

"Recovery, I think it's fair to say as we move further along the continuum here of response, is increasingly far away," he said. "We'll be pushing to look at what we can do for our tourism-oriented economies."

Sturdy pledged to push for the return of the Rural Dividend Program, which helped communities of fewer than 25,000 people with economic diversification projects but was halted last year, to help with economic recovery efforts.

Asked if the province would be willing to tap into the recovery fund to ensure businesses survive that long, Sturdy said the government has not yet determined how those funds would be deployed.

Sturdy urged caution on making timelines, noting that the return to normalcy won't start until there's a COVID-19 vaccine, which experts predict is likely a year away at least. Once that phase starts, however, Sturdy is concerned with how Whistler and the Sea to Sky will adjust.

"We are such a tourism-dependent region that without people travelling from all over the world, how can we ever possibly see the type of revenues and employees and activities that we have been used to over the course of the last decade or more?" he said.

"Recovery is critical—what does that look like? How do we redefine tourism going forward? What will our future look like in terms of health or how we interact with people? Obviously, it's catastrophic."

Making rent

While the provincial government has made commitments of a $500 to landlords for each residential unit, there is no such program for commercial renters, and likely won't be.

"There's been lots of discussion but no announcements around commercial leases or commercial rents, or the risks associated for businesses with those leases," Sturdy said. "We're pushing the province to have a policy around this."

However, later on in the teleconference, Sturdy said he wasn't holding his breath.

"I'm not optimistic that the government will get involved in individual terms of leases in the province," Sturdy said.

National response

Canadian Federation of Independent Business president Dan Kelly characterized the federal government's response as slow, while acknowledging that the health crisis came first, small businesses started suffering at the same time.

"They have been slow in recognizing that the more immediate impact on most Canadians was the economic emergency," he said. "Essentially what's happened is we've lost a couple weeks and we're playing catch-up, but we are getting there."

Up until the initial rollout of the CERB and wage subsidy increase, he said, layoffs were the only solution for many businesses.

"It is far better for the government to support somebody to keep their job, given the unique nature of this crisis, rather than to pay them to be unemployed and severing the relationship between the employer and the employee," Kelly said. "It's going to be so much harder to put the puzzle together again at the end of this once the emergency phase ends.

"Employees [on EI or other assistance] will take weeks, potentially months, to get back to work."

Senior economist with the Canadian Centre for Policy Alternatives B.C. Marc Lee agreed, and said the measures have generally been encouraging as government looks to keep small businesses afloat as they maintain relationships with their workers.

"It's definitely a necessary measure. We know there's a deep recession underway across Canada, in B.C. and Vancouver and Whistler. We want to prevent that from becoming an outright depression and one of the ways we do that is trying to maintain as much as possible," he said. "Having an experienced and competent workforce is critical and if you lose that during the crisis, it takes a lot more to have to rebuild that after the fact."

While still waiting for full details of the wage subsidy, Kelly said organizations such as new businesses, those with skyrocketing costs, or ones with small margins that are devastated by a decline far less than 30 per cent, may not qualify but still desperately need it.

The next major concern, Kelly said, is rent, noting that only 21-per-cent of CFIB's members are currently operating at full capacity. Some, he said, can cover April but beyond that, the situation gets dicey, with a quarter unable to make rent for April.

"Landlords may be willing to carry them for a month or two and defer those payments but many of those business owners remain [pessimistic] that they'll be able to pay that back," he said. "Businesses are going to struggle to pay these bills that they've just deferred."

Kelly said the CFIB is lobbying provinces to eliminate property taxes during the crisis while also providing businesses with up to $5,000 a month to help cover rental expenses.

Relevant links

CRA My Business

Government of BC tax info

Government of Canada tax info

BC Hydro relief

ICBC deferral info

Canada Emergency Business Account

Federal wage subsidy program

Canada Emergency Response Benefit

BC Emergency Benefit for Workers

Government of BC COVID-19 leave