Time is running out for small businesses still blocked from COVID-19 aid

Update

This story has been updated with comments from Morinville-St. Albert MLA Dale Nally.

When Prime Minister Justin Trudeau first announced Ottawa's rent assistance program, Eldyka Simpson thought she may have finally found a lifeline for her St. Albert wellness clinic after being barred from most other supports. 

Under the Canada Emergency Commercial Rent Assistance (CECRA) program, federal and provincial governments will cover half of small-business tenants’ rent for April, May and June.

However, the program is optional for landlords to apply, and requires them to absorb one-quarter of the cost.

"The CECRA looks good until you read the fine print," Simpson told the Gazette. 

With May rent payments looming, only 10 per cent of small business owners say they qualify for the CECRA, and believe their landlord will participate in the program, according to a survey by the Canadian Federation of Independent Business (CFIB).

The Ripple Effect Wellness Centre opened three years ago in St. Albert in Tudor Glen, and after all the hard work it took to build it up, the business was actually supposed to see a profit this year, Simpson said.

Now, if the small clinic doesn't get help soon, it may have to shut its doors permanently next month.

"If I find out by mid-May that I've got no rent relief, I'll close at the end of May."

Trouble with landlord

Kootenay Holdings, a multi-national corporation, initially told the clinic last month "it was business as usual" when it came to monthly rent, Simpson said.

As the deadline loomed closer, she went back over her lease agreement and found a clause only enacted by an "act of God."

The clause, called the Force Majeure, states that should either party not be able to uphold their end of the agreement because of circumstances beyond their control, monthly rent would be postponed during months affected.

She hired a lawyer to confirm, and asked Kootenay Holdings to trigger it. 

The landlord's lawyer told Simpson and her legal counsel that they had "misinterpreted the clause," she said. If she still had access to the space, rent was still due. 

Now, Simpson said her lawyer told her she has a case, as her business remains closed due to government mandate. But the courts are only taking essential, urgent cases right now, meaning it would take months before her case was heard. 

"At the end of the day, it doesn't change anything," Simpson said. "I think they were trying to prevent me from going after them, to be honest."

The St. Albert Gazette did not receive a response from Kootenay Holdings after requests for comment. 

Three days before May 1, Simpson said the landlord agreed to defer rent payments for that month. However, that means the amount will simply be tacked on for future months.

And Simpson isn't confident Kootenay Holdings is willing to take a pay cut to apply for the CECRA.

Blocked from the start

When COVID-19 hit, Simpson said it became virtually impossible to offer services like massage and acupuncture while abiding by the two-metre physical distance rule.

She decided to close the business on March 18, about a week before the province announced the closure of all non-essential businesses, doing her part to "flatten the curve."

The clinic employs two part-time staff and around 10 independent contractors to offer services including massage, acupuncture, reiki and mental health therapy. 

The next day, she went to her bank to see if she could extend a line of credit to act as an emergency fund should she need it.

The bank told her she didn't qualify because she had closed her business before the province mandated it. Had she called a week before, they could have put it through, she was told. 

When she tried to access the business interruption coverage with her insurance company, Simpson was blocked again. The coverage only covers physical damage, not an immediate shutdown because of a pandemic.

"My representative said, 'If you can get COVID-19 to cause a flood or an explosion, you're covered. Otherwise, sorry,'" Simpson said. "That was mind-boggling to me."

The Canada Emergency Business Account (CEBA) $40,000 loan felt like a potential lifesaver in a vast, unforgiving ocean – until Simpson found out she wasn't eligible because of the payroll requirement. As is standard in the personal care industry, her practitioners are paid as independent contractors. That means she isn't eligible for the federal wage subsidy, either.

"They do their own taxes, so that doesn't count as payroll (from) this perspective. My payroll is over $270,000 last year, but it doesn't hit the $20,000 (threshold)," she said. "We are shut out of money that we would need to pay back anyway." 

The only federal program she could access is the Canada Emergency Response Benefit (CERB), which gave Simpson an extra $2,000 a month.

"I mean, it's $9,000 in debt versus $11,000 in debt," she said. "You have to decide, do I put ($2,000) into my business or do I use it for my family?"

These are problems David Niebach at Herc's Nutrition knows all too well. Barred from accessing federal support, Niebach continues to invest his own capital, including some of his retirement savings, into his nutrient and supplement store to keep it afloat. 

Herc's landlord RioCan said in a letter to Niebach they would be looking into applying for the federal program, but there's been no definitive answer yet, he said. 

"They have all the power, and you really don't have any. As a small retailer, what are you going to do? You just don't have the bargaining power to begin with," Niebach said. 

In the last few weeks, the small business owner and accountant said he's acted as a small business consultant to help others navigate government programs. 

Based on his calculations using Statistics Canada data, 50 per cent of all businesses in Canada are still falling through the cracks.

"It really shows there was no rhyme or reason into this relief," he said. "Small businesses are left to shoulder the burden."

Massive gaps remain

The Alberta Chamber of Commerce took a look at what COVID-19 supports businesses had actually received so far through their latest survey.

Only 18 per cent of businesses said they were successful in deferring utility, credit, mortgage, lease or rent payments.

Two per cent received money from the CEBA; 49 per cent said they did not apply. Forty per cent said they had not applied for the Canada Emergency Wage Subsidy, and only six per cent said they were able to access it. 

Half of the businesses surveyed by the Alberta Chamber of Commerce said they have used up most of their cash reserves.

"This is the scariest," said Ken Kobly, president and CEO of the Alberta Chambers, of the result. "Unfortunately, there are way too many small businesses that are facing the same situation that (Simpson) is facing." 

Sixty per cent of businesses said they would not be able to pay their deferred payments in one lump sum and remain financially solvent. Only 10 per cent said they could. 

"It's all fine and good to give deferrals, but at some point in time, those deferrals have to be paid," said Kobly.

"Couple that with the anxiety about when they will actually be able to open up – are customers going to feel comfortable enough to come? Or are they going to still be panicked by COVID-19?" 

Most small businesses are operating as a limited company and if they have any outstanding debt through the bank, like equipment loans or an operating line of credit, the owner of the company more than likely will have to put up a personal guarantee. 

"The owner is basically pledging all of their personal assets to the bank for that. They've got their houses on the line," he said. 

The Alberta Chambers is now advocating for government to recognize there needs to be direct cash infusion, as deferred payments are not enough to solve the issue. 

St. Albert NDP MLA Marie Renaud invited Simpson to speak about the challenges her wellness clinic is facing in a virtual roundtable discussion with other businesses in the province next week. 

The federal support programs were a good start, but now it's time for the province to step up, Renaud said.

The provincial government could backstop landlords to encourage them to take advantage of federal programs, or put in place a rent subsidy for corporations or businesses. Freezing rising insurance premiums would also help, she said.

"While I'm disappointed that federally, people are falling through the cracks, I'm more disappointed that the province isn't doing anything to support our businesses. That's going to make our recovery much more challenging."

St. Albert-Morinville UCP MLA Dale Nally said the province has directed $13 billion to help Albertans during the pandemic already, through either direct subsidies or deferrals on taxes and other payments – and they aren't done yet. 

"We're not capping it at that, and we anticipate that there'll be more stimulus," Nally said. 

It would be difficult for the province to create their own opt-in program to replace Ottawa's, he said, but they will continue to work with the federal government to make sure these programs are working for businesses. Allowing businesses to pay back deferred payments over a longer period of time could also give them more of a chance to catch up. 

Nally took aim at Renaud's comments, noting governments are not working with infinite resources.

"She doesn't understand that all levels of government are having a much more difficult time raising funds and selling bonds because the world has changed. We have to manage it responsibly, and that's what we're trying to do," he said. 

"The approach we want to take is working with the federal government to make sure the program is working, and encourage landlords to opt-in. This is unchartered territory, and it's changing daily, but we will continue to monitor and we will continue to support Albertans as best we can."