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Liz Clark, president of Chair Décor, in the company's storeroom in Woodbridge, Ont., July 16, 2021. Clark says her business is currently in 'one of the worst positions since the pandemic started.'

Galit Rodan/The Globe and Mail

With gyms, museums and indoor dining now reopening in Ontario, Liz Clark says Canadians could be forgiven for thinking business owners are in good spirits.

“People are getting back to life, and they figure everything’s good. But a lot of our businesses are in one of the worst positions since the pandemic started,” says the owner of Chair Décor Etc. Inc., an event company based in the Toronto suburb of Woodbridge, Ont.

Usually, Ms. Clark would spend a busy summer setting the stage for weddings with her wide selection of linens, chairs and accessories. This year, her revenue has plunged to 10 per cent of pre-COVID-19 levels, as restrictions and uncertainty have caused many customers to push back their celebration plans. Now, as the government support keeping her business running is set to expire in less than three months, Ms. Clark has deep concerns.

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“How can you hire and train and pay the bills when you have nothing coming in yet? It’s a very scary position that the government’s left us in.”

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Many businesses in the arts, recreation and hospitality sectors already had slim margins, and normally depend on busy summer seasons to keep them going throughout the rest of the year. But with venues closed or operating at limited capacity, business owners have relied on subsidies such as the Canada Emergency Wage Subsidy (CEWS) and the Canada Emergency Rent Subsidy to prevent them from falling into an uncomfortable situation: Take on more debt or drop the curtain permanently.

The application period for the Canada Emergency Business Account, which provided interest-free loans of up to $60,000 for small businesses, with as much as $20,000 that amount forgivable, closed at the end of June.

The association that represents Canada’s small businesses is calling on the federal government to extend support for arts, culture and recreation to prevent even more jobs in those sectors from disappearing.

“There’s a sense of panic among many in those key sectors, who have been just eviscerated by the pandemic,” Dan Kelly, president of the Canadian Federation of Independent Business, said in an interview. “We are calling on government to see our view that it’s just way too early to scale back the subsidies. If we pull the plug on their life support, tens of thousands of those businesses are just not going to make it.”

The subsidies, which allot money depending on factors such as income loss and number of employees, started to decline in June and are scheduled to expire in October. Meanwhile, the Canada Recovery Hiring Program, a wage subsidy program intended to help businesses rehire employees, will run until November.

With capacity limits at 50 per cent in Ontario, British Columbia, Manitoba and other provinces, Mr. Kelly said many businesses in arts and recreation, such as indoor play gyms, escape rooms, bowling alleys and dance studios, will require this support until pandemic restrictions are lifted and borders open.

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In an e-mail response to The Globe and Mail, Katherine Cuplinskas, a spokeswoman for Finance Minister Chrystia Freeland, did not address the CFIB’s call to extend federal support for businesses in the arts. Ms. Cuplinskas said the federal government has offered targeted support to hard-hit businesses and organizations experiencing a drop in revenue – measures that include wage and rent subsidies, and lockdown support.

“These essential COVID-19 support measures are extended until September, 2021, and build on the $1-billion committed in this year’s budget to help the tourism industry recover in Canada, and the $1.9-billion committed to support the arts, culture, heritage and sport sectors,” she said in a statement.

She pointed to support provided through other programs, including the Recovery Fund for Arts, Culture, Heritage and Sport Sectors and the Reopening Fund for festivals and other cultural events.

For some organizations, this government support has been enough. Ben Stone, artistic director at Halifax-based Zuppa Theatre Co., said border restrictions have cut into his company’s income, with two major events cancelled last year and plans to travel abroad to Britain this fall uncertain.

However, Mr. Stone said Zuppa was among the lucky ones: With no venue for which it had to pay rent, the theatre only used CEWS for the first few months of the pandemic. And it could rely on funding from other sources, such as small grants from the Canada Council for the Arts, to stay solvent.

Meanwhile, other businesses face rapidly deepening debt as subsidies decline and fixed costs remain the same or increase. Steven Brown, the owner of Hub Climbing’s two rock-climbing gyms in Markham, Ont., and Mississauga, said his revenues were down 95 per cent last year. While he expects that will climb to 50 per cent by next spring, that means he will just break even.

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“Businesses like ours are in a situation where we don’t have enough hours or capacity to hire staff, but we don’t have enough staff to raise our revenue,” Mr. Brown said. “So, we’re in this kind of a funny loop right now, and we need support to get past this.”

Indeed, the arts, recreation and other sectors have depended on loans when government subsidies could not fill the gap. More than three-quarters of all tourism businesses, for example, have taken on debt since the beginning of the pandemic, and a third of tourism businesses have taken on more than $100,000, according to a June, 2021, Tourism Industry Association of Ontario report.

With nearly $25,000 in interest and principal payments due every month, Mr. Brown is concerned he will have to borrow more to stay in business.

“We’re maxed out in debt. The load is on us,” he said. “Reopening does not mean any recovery is happening any time soon.”

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