No matter what you think of the Canadian response to the COVID-19 economic crisis, it confirms that at least one of the lessons from past crises has been learned: whatever you are going to do, do it fast, because time is your greatest enemy.
But in the rush to react, things inevitably get missed. In our current crisis, one of those early misses was overlooking the sector that employs nearly 70 per cent of the private-sector workforce: small businesses.
Before COVID-19 struck, the sector was already under pressure, with perpetually tight margins, rising rents, limited cash reserves and chronic shortages of much-needed talent. Introduce a pandemic into this already frail environment and the results aren’t just devastating: they’re potentially fatal, with nearly two-thirds of small businesses in Toronto facing permanent closure. Policy-makers eventually woke up to this fact and have in the past few weeks created an “alphabet soup” of programs to respond – including the Canada Emergency Wage Subsidy (CEWS), the Ontario-Canada Emergency Commercial Rent Assistance Program (OCECRA) and Canada Emergency Business Account (CEBA) loans.
Even if these programs work as intended, the plan in its current scope is still likely to fall short. That’s because it isn’t really a plan at all: it’s a collection of rapidly pulled-together programs designed to try to make up for lost time. Though that urgency is commendable, the focus on the headline issues of the day means the response isn’t comprehensive. For small businesses – where the cracks run deeper and the losses loom larger – we need to think bigger, we need to coordinate across all levels of government, and we need to do it all soon.
Three phases for recovery
A recovery plan for small businesses should envision three phases. First is a “Surviving the Shutdown” phase, which largely consists of the financial programs we already have in place. Most will need extension as initial deadlines close in, but also ongoing refinement as their initial flaws and imperfections become clear – for example, adding a commercial eviction moratorium, as advocates have called for. Policy-makers need to build faith in these programs by showing their commitment to continuous improvement, which means making the feedback they receive transparent and public. A repository like the U.S. Consumer Financial Protection Bureau’s complaints database could be a model for that.
The near-term support should not stop there. To date, policy has focused almost exclusively on supporting small businesses but has said little about small business owners, even though the pressures on the latter are as great as on the former.
Mental health is a prime example. For owners, it is an issue for has persisted for years prior to the crisis but has subsequently and dramatically been exacerbated by it. Owners have few formal resources at their disposal, lacking the kinds of benefits or Employee Assistance Programs those employed in other sectors often have. The federal and provincial governments are developing new resources to serve mental health needs broadly, but research has shown these programs need to be tailored to the specific needs of a population to have any effect. To serve owners, this will require funding partnerships and new programs – with mental health providers, the Canadian Federation of Independent Business and other small business associations at the core.
“Managing the Reopening” is the phase we are beginning to enter, though the timing for widespread reopening is unclear (although Ontario’s Framework for Reopening offers some clues). But even without an exact schedule, businesses need much more guidance around the standards they must meet to be allowed to open. This is the only way owners will be able to assess what they will need to change, as they can ill afford any delay for renovations or procurement once a date is set. In Ontario, these standards have started to arrive from the province in the form of detailed sector guidelines for reopening. Over the coming weeks, these will need to become increasingly comprehensive – covering a wider range of sectors, as those in some US states do – to have the desired effect. They will also need to become more useable for business owners, presenting information in checklists or interactive questionnaires.
From there comes the critical question of how businesses fund those changes – the widening of aisles, the moving of entrances, and anything else to reduce potential for the virus to spread. This renovation burden could remove what hope is left in many business plans. CEBA loans were developed to address some of these costs, but owners have repeatedly voiced concerns about adding to their debt. As public health guidance is developed and the scale of renovation needs becomes known, this is almost certainly an area where funding will be required – potentially using energy retrofit programs as a mechanism, but disbursing funds as grants instead of yet more debt.
“Spurring the Recovery” is the final phase of any plan, but by far the least certain. It is impossible to know how consumer spending will rebound, only that it will need encouragement to do so. The broad economic tools needed are clear: continued low interest rates, ongoing income support for those displaced from their jobs, and perhaps additional tax rebates and incentives. By contrast, the microeconomic incentives are so potentially diverse – from buy-local campaigns, to streetscape improvements, to loyalty programs and more – that it is impossible to develop a one-size-fits-all approach.
Government policy-makers shouldn’t try to be all things to all small businesses. If cities or other levels of government try to be the conduit for all the work and experimentation that will need to happen over the coming months, they will either produce programs too generic to be useful or become a bottleneck for approving ideas that emerge from the ground up. Ultimately, the key to spurring small business recovery is putting it in the hands of the community that supports them.
In many cities, local business improvement areas (BIAs) have traditionally played this role by hosting events, organizing promotions, running campaigns and more. But their models were built for a different moment: they have neither the resources, nor the geographic coverage, nor the flexibility to seize time-sensitive opportunities. We need a fundamentally new approach – one that makes these organizations easier to launch, easier to fund, and easier to run in what is now a starring role.
This means creating a new class of local economic development association. It should be temporary so as to avoid the same start-up barriers around voting, signatures and annual levies that typical BIAs face. It should have access to the same – though expanded – pools of funding as more formal organizations do and a minimally onerous set of criteria for how they are used. It should have the resources to add staff to do the work, potentially tapping into a hungry but idle student job pool. And it should encourage citizen (or “consumer”) representation to ensure its programs resonate.
Reason to believe
As policy-makers continue to catch up to events, there is an incredible amount of good they can do simply by communicating that they have a plan. At this stage, it is less important to settle on all the final details than it is to show small businesses there is a vision and a commitment to addressing the full scope of the crisis for as long as they need.
Unlike other segments of the economy, small businesses can pull the plug at any moment. If they don’t see a future for their work long-term, they alone can decide to cease the struggle. They don’t have restructuring programs or shareholder votes like large corporations in trouble – they have one person, or a small few, who need to believe. And outside of a few programs to get them through the spring, we haven’t given them enough reason to do so.
But we can and we should. Not months from now when programs are set to expire, but now while things appear darkest. As with all things in a crisis, time is of the essence.
Will Meneray is a public servant, community advocate and former city council candidate based in Toronto. More details on his Small Business Recovery Plan for Toronto can be found here. The views expressed are his own and not those of his employer or affiliations.
