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The government is expected to develop additional lines of support for Canada’s small and medium businesses, including additional credit facilities.DARRYL DYCK/The Canadian Press

Small business owners impacted by the COVID-19 pandemic are being forced to make the tough choice of whether to lay off staff so they can get employment insurance (EI) or keep them on with few or no hours in case the government offers an improved financial incentive package.

Frank Bento, who runs Moliceiro, a 40-seat Portuguese-style family restaurant in Toronto, is considering what the best options are for his six staff now that the restaurant has closed due to the coronavirus epidemic.

“I don’t want to put my staff on EI right now when the business package might be a better option,” Mr. Bento says. “I told my staff to see what it’s going to be, then I will sit down with my accountant and lawyer and see what the best option is.”

Business owners say government measures to date, including loans and covering 10 per cent of payroll expenses, don't go far enough to help them maintain staff amid a dramatic drop in business, or complete shutdown, due to the fallout from the coronavirus.

“It’s not going to incentivize people to keep their employees,” Andrew Zakharia, founder of Toronto-based AZ Accounting Firm, says of the 10-per-cent-of-payroll subsidy. “You’re getting 10 per cent, where does the other 90 per cent come from? The revenue for a lot of businesses is nonexistent right now.”

The government is expected to develop additional lines of support for Canada’s small and medium businesses, including additional credit facilities, the Globe reports. However, business owners say it still wouldn’t be enough.

Mr. Zakharia says the qualification criteria for the new loan programs facilitated by Export Development Canada and Business Development Bank of Canada exclude many businesses that were struggling even before the crisis hit and are most in need today.

“Businesses that need immediate financial aid ... include a large percentage of businesses that wouldn’t be able to borrow under normal conditions,” he says. “Many more established businesses have cash reserves and already have access to some credit.”

Layoffs, salary, EI and more: Your coronavirus and employment questions answered

He also describes the loan application as “stressful,” including the requirement to provide forecasted financials to demonstrate the level of downturn expected.

“Providing a forecast is difficult – no one knows how long this will last and how their business may be impacted, if [it’s] not already severely impacted,” he says.

He also believes the government should ensure that there is a forgivable portion of these credit facilities, given the uncertainty around how quickly a recovery might happen.

“Without a forgivable portion of the loan, many people will choose to cut costs — staffing is generally the easiest and most expensive cost — as they won’t want to carry debt to fund their employees,” he says.

Capital House Cleaning Ltd., a Surrey, B.C.-based residential house cleaning company, has been forced to reduce its staff hours "dramatically" from a month ago due to the loss of business from the coronavirus crisis, says owner Colleen O'Connor.

"While reduced hours for everyone is terrible, the last thing we want to do is lay people off," she adds, in particular since EI processing times are unknown.

Her goal is to try to give full-time employees as much work as possible during these difficult times.

"They are not getting full-time hours, but we hope things will improve as people’s self-quarantine periods pass and we are able to provide home cleaning services while social distancing," she says.

Ms. O'Connor is also disappointed with Ottawa’s small business incentives offered to date, saying it’s not enough to help keep businesses running “with revenues dropping so drastically and quickly.”

Doug Appeldoorn, co-owner of the People’s Pint Brewing Company in Toronto, said the business had to lay off two part-time workers, a move that enables the employees to collect EI.

“They couldn’t live on the part-time income they were making for us,” he says. “It wasn’t because we didn’t want to keep them on. It was best for them ... We want to do whatever we can to help our staff.”

Other full-time employees saw their duties change as the business shifted its focus more towards its retail store and beer delivery service. The business had to suspend its deliveries to bars and restaurants because of the coronavirus-related closures.

"It’s going to be tough for the next few weeks," says Mr. Appeldoorn.

He says the government measures for small businesses to date are a good start but won't solve their problems amid the economic shutdown triggered by the coronavirus pandemic.

"Lending businesses money is only going to add more debt and, until revenues start to pick up, we will probably burn through that money very quickly,” he says. “Offering to cover 10 per cent of payroll expenses isn’t enough for us either. Without more substantial supports, we may need to make more tough decisions, such as further scaling back our hours and laying off more staff.”

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