Three years after the COVID-19 outbreak, Amanda Munday notes that her business has just gone through the most “normal” years since the pandemic began.

But that doesn’t mean her company, or those of her fellow small-business owners on Toronto’s busy Danforth Avenue, have returned to anything close to its prepandemic state. The new “normal” is still pretty far from the old.

Her company, the Workaround – a combined co-working office space and daycare in Toronto’s east end – recently marked a full year since the lifting of the last set of major public-health restrictions, related to the Omicron wave of the virus. The general reopening of the services sector of the economy has delivered a more stable and predictable environment, and the business is generating enough cash flow to stand on its own two feet. Ms. Munday has even been able to whittle down some of the debts the Workaround incurred in the depths of the pandemic, when public-health shutdowns put it on life support.

“We’re still standing,” she said last week, with a tone of optimism that, I can only guess, is the required mental state if you’re going to survive as a small-business entrepreneur over the past three years.

There were definitely times that it wobbled badly, and nearly fell over entirely. When I first spoke with Ms. Munday shortly after the sweeping March, 2020, the lockdowns began, she didn’t know how she was going to survive past the end of the month – she had no money for rent and loan payments that were coming due. When we spoke again on each anniversary of those shutdowns, she shared tales of having teetered on the brink of bankruptcy in the intervening year. Now, those fears of the death of her business have subsided.

But she’s still operating on less than two-thirds of her pre-COVID-19 monthly revenue. Uncertainties around the future of work-from-home, periodic waves of COVID and seasonal viruses, and fears of a recession have all kept customers cautious.

Meanwhile, like in most small companies, the pandemic has left a debt hangover, and the soaring interest rates over the past year have deepened the headache. Now, hundreds of thousands of businesses are staring into the Dec. 31, 2023, the deadline for repaying loans under the federal Canadian Emergency Business Account (CEBA) program – a pandemic lifeline that now looms as a burden that many will struggle to shoulder.

“I’m seeing a lot of desperation,” Ms. Munday said.

That dark mood is reflected in the Canadian Federation of Independent Business (CFIB) monthly Business Barometer, a survey of small-business sentiment. It’s hovering near its lowest readings since the 2020 depths of the pandemic shutdowns, and at lows never before seen outside of a recession.

“Many businesses continue to feel the burden of years of subpar business conditions, which are now compounded by all sorts of rising costs,” CFIB chief economist Simon Gaudreault said in the latest Business Barometer report.

Growing numbers of companies have cracked under the pressure, as the safety net of government pandemic support programs has been removed. The Office of the Superintendent of Bankruptcy, a federal agency, recently reported that business insolvency was up 39 per cent in the 12 months ended Jan. 31, compared with the previous year. In January alone, business insolvencies were up 55 per cent compared with the same month a year earlier.

CFIB survey data shows that COVID-related debt burdens have eased somewhat over the past year, but for many businesses, they’re still onerous. The group said that 58 per cent of businesses still report carrying pandemic-related debt, with an average COVID-19 debt load of $106,000. That’s down from 67 per cent, and an average of $158,000, a year ago.

Ms. Munday’s business is pretty typical in that regard. She estimates that the pandemic added about $100,000 to her debts, doubling them from prepandemic levels. But she has whittled her pandemic debts down by about $50,000 over the past year.

She’s now generating adequate monthly revenue to cover her bills and keep the business going. But she’s in no position to take on new debt – especially with today’s high interest rates.

Bank of Canada data shows the average rate for a business loan was nearly 6 per cent in late 2022, up from less than 2.5 per cent a year earlier. That has definitely put a chill on small-business owners’ willingness to invest.

“There’s absolutely no world where I would take on new risks,” she said.

And now, she and nearly 900,000 other small businesses that took out CEBA’s interest-free and partially forgivable loans face an ominous deadline. If they don’t repay the non-forgivable portion of the loan, in full, by the end of 2023, they’ll lose the forgivable portion and have to repay the full amount – plus 5-per-cent interest starting Jan. 1, 2024.

For the more than half-million companies that tapped the program for the full $60,000, that means either somehow freeing up $40,000 of cash by the end of the year, or losing the forgivable portion of $20,000 and facing new loan repayments, on top of their other debt obligations.

Ms. Munday worries that some of his fellow entrepreneurs in the Danforth business community can’t meet the deadline, and won’t survive the added burden. The consequence could be another wave of business insolvency next year.

“It’s incredibly stressful,” Ms. Munday said. “We’ve been beaten down for three years, and now we have this.”