Business Bankruptcies Expected to Increase as Weather Cools

The safety precautions necessitated by the COVID-19 pandemic have resulted in financial insecurity for thousands of individuals and businesses across Canada to date. However, some business owners fear they may be facing even more hardships as the fall weather approaches, forcing people inside. The fact that a large part of the pandemic to date has taken place in summer months has been key because it has enabled people to spend time outside. This has been particularly helpful for businesses such as restaurants and bars, allowing them to open for business before indoor dining was permitted, and to continue welcoming patrons who may be leery about dining inside. Some restaurants have gone so far as to create a patio where there wasn’t one previously in order to shift business outdoors. Further, shops and outdoor malls saw an increase in business as the province entered phase 3 of reopening, and outdoor foot traffic meant that customers were once again stopping by and walk-in traffic resumed.

However, the warm weather has an expiration date, and now that we are into September, people are looking ahead to fall and early winter and what that will mean for businesses. Many people are still not comfortable with the idea of indoor gatherings, even though they are permitted in many cases. The compromise that has allowed some to continue to patronize local businesses has been the ability to do so outside. Once the colder weather arrives, this will no doubt have an impact on the number of people willing to dine out. In addition, there are concerns that the infection numbers will rise once school resumes next week. We’ve seen it happen in other jurisdictions, and the numbers in Ontario have already seen a slight incline in the past week. This could force the province back into a more restrictive phase, meaning some businesses may have to shutter once again.

Corporate Bankruptcies on the Rise

According to a recent CBC article, corporate bankruptcies have been on the incline since the start of the pandemic, with more expected in the coming months. Several businesses have sought restructuring and creditor protection in light of a dramatic drop in business, or even forced closure due to mandated health precautions. While many of these businesses have been numbered companies, some major retailers are among those who have been affected as well, including Aldo, David’s Tea and Reitmans. In many cases, the recent crisis has likely brought existing issues to the forefront, but the longer the pandemic lasts, the more likely it may be responsible for an increase in businesses seeking protection.

CEBA Program Expanded

One option for businesses facing financial troubles but trying to avoid creditor protection or restructuring is to apply for a loan under the Canada Emergency Business Account (CEBA). The program, which came into effect in April, provides loans to businesses to be used for meeting obligations relating to payroll, rent, insurance and other necessary business-related expenses. The program was expanded in June to include sole proprietors and small businesses without payroll expenses. Successful applicants can qualify for interest-free loans up to $40,000. If repaid in full by the end of 2022, 25% of the loan will be forgiven. While the program was originally set to expire at the end of August, applicants can now apply through to October 31st of this year.

Whether you are a small business looking for options to manage financial stress during the pandemic or require representation in moving ahead with bankruptcy proceedings, GLG LLP can help. Our skilled business lawyers in Toronto regularly assist corporate clients with a variety of issues, including the configuration and structure of a venture in a way that is most beneficial to those involved. Further, we advise and represent corporate clients on related matters including commercial real estate ventures and litigation if necessary. If you are a business owner with concerns related to your financial obligations and responsibilities in light of COVID-19, we will review your situation and work with you to find your best path forward. Call 416-272-7557 or complete the online form to arrange a consultation with one of our lawyers today.