Ontario must give way to business owners affected by COVID


One of the strangest facts about COVID-19 has been the lack of business bankruptcies. After a significant number just after the start of the pandemic, business openings exceeded bankruptcies every month from May 2020 until last August. The reason is not a great mystery. The businesses that survived the initial shutdown have remained afloat thanks to federal support for wages, rents and debt.

As the co-founder of Save Small Business, where we have rallied 38,000 companies for rent relief and other support, I am proud of the small role we have played in this public policy success.

However, for many small businesses – and the families they support – this success is just a mirage. Yes, the lights are always on, but over the past 20 months, they’ve racked up massive debt and often owe their landlords months and months of rent arrears. Insurance and other costs are on the rise.

If you’ve been to a crowded restaurant lately, it might sound like hyperbole. But think about the dry cleaner. With so much work from home, so few trips for business meetings, and so many events canceled or moved online, will this industry ever return to “normal?” There are over 2,000 dry cleaners in Ontario, most of them micro businesses that support families.

Spend five minutes thinking about it and you’ll come up with a dozen other industries like this.

From the outside, the answer seems obvious: walk away. If the business is so bad, with no hope of paying its debts, go bankrupt and move on.

But the reality of closing a business is often misunderstood. For many small businesses, in order to get loans or get a landlord to agree to a lease, the business owner must provide a personal guarantee. This means that in order to escape debt, not only do businesses have to go bankrupt, but the owner must also go bankrupt. It could mean the loss of a home, and it almost certainly makes it impossible to get new loans or new leases for at least six years.

It is an expensive, confusing and intimidating process.

So, for the pressing who has done nothing else for 20 years, no other choice but to try to scrape while hoping for a return to normal. This situation does not serve Ontario well.

There is a solution. Ontario could develop a program to help small businesses affected by COVID go bankrupt in a fair, non-punitive way. He could work with rating agencies and banks to reduce the long-term implications for homeowners. They could set up a special tribunal to support homeowners who qualify through the process.

Small business owners in Ontario have tried to weather this pandemic. They pivoted, they adapted, they closed when asked to protect their communities. For many, however, there is no way back. It is time to give them a way out.

Jon shell is the Managing Director of Social Capital Partners, a nonprofit organization that seeks to expand access to homeownership in the economy.


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