Small Businesses in Canada Continue to Struggle Under Mountains of Debt and Challenging Business Environment: CFIB


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COVID debt, rising costs and lack of sales pose major challenges to a small business recovery in Canada, says the national organization representing the sector.

According to the Canadian Federation of Independent Business, only 40 per cent of small businesses are back to normal revenues for this time of the year and only 27 per cent say they are fully recovered.

On top of that is a mounting debt load which small businesses had to take on to get them through the COVID19 period with its lockdowns and other public health safety measures.

Dan Kelly

“Two-thirds of small businesses (65 per cent) have had to take on debt, at an average of $160,000, just to survive the past two years,” said Dan Kelly, President and CEO of the CFIB. “For almost 900,000 business owners, up to $60,000 of this debt is in the form of a government-backed Canada Emergency Business Account loan. 

“The 2022 budget missed an opportunity to forgive a larger portion of these loans for the most deeply affected small businesses.”

The CFIB represents about 100,000 small businesses across all sectors throughout the country.

Kelly said over the past two years at no point had over 40 per cent of small businesses been able to bounce back to normal levels of revenue.

“We thought that now that restrictions have been largely lifted, particularly at the provincial level, that we would see more of a rebound and more businesses inching back to normal operations. I was really surprised, depressed in fact, to see, while we are about 40 per cent, it’s now 42 per cent of businesses that are back to normal levels of revenue. Imagine that. Less than half of Canadian businesses are at normal levels of revenue for this time. Most of our members are telling us they have not had a normal month of sales in over two years,” said Kelly.

Type Books at 883 Queen Street West (Image: Dustin Fuhs)

“And when you add to that the staggering debt level that they’ve taken on through the pandemic, the fact that sales are not back and of course costs are rising through the roof, this is really creating some terrible math for small business owners.”

Kelly said a couple of factors are contributing to the continued situation where normal sales and revenue have not returned for small business owners.

“While the restrictions are lifted, the psyche on the part of consumers has not yet changed. Many consumers, especially with this most recent round of worry about BA.2 (the Omicron variant of the Coronavirus), are continuing to stay home,” he said.

“There’s no question it’s having an impact on small business. So that’s chapter number one to explaining what’s going on. Secondly, there seems to be a disconnect between what’s happening at the larger economic level. The headline economic numbers for the country are good. Job creation numbers are good. GDP growth has been quite positive. But that isn’t telling the whole story.

Big Rock Brewery in Liberty Village (Image: Dustin Fuhs)

“When you look at the sectors that were most deeply affected, retail, hospitality, the service sector, arts and entertainment, these businesses which of course are a huge chunk of the small business community, they are still super far away from normal. 

“The final piece that I’ll mention is of course we all have to admit that there are likely some permanent changes in economic activity that have happened over the course of the pandemic. The growth of online shopping and virtual activities. Offices not coming back yet in large numbers. Workers not coming back in downtown cores. So there are some questions as to how much of this is temporary and how much of this is permanent. And that we haven’t yet figured out as to how significant those factors are.”

Kelly said the fact only 27 per cent of small business owners have fully recovered is “really low and worries me.”

“When you look at the debt levels that businesses have taken on, even those that are back to normal, the average small firm has taken on $160,000 in COVID-related debt – $60,000 of that typically is in the form of a CEBA (Canada Emergency Business Account) loan – a government-backed loan, $100,000 of that is other debt that they just inherited either in lines of credit or borrowing from family members, cashing in RSPs, whatever,” said Kelly.

“When we look at that debt burden, a business actually doesn’t have to just go back to normal but if they’re going to have to repay that, they’ve got to go above normal to be able to try to get the debt retired and we’re not seeing signs of that happening, certainly not happening any time quickly.”

And that’s one of the reasons the CFIB is pushing so hard for the federal government to forgive a larger portion of those loans to give small businesses a little more room to operate. The CFIB is calling on the federal government to help the hardest hit SMEs deal with their COVID-related debt by increasing the forgivable portion of their CEBA loan to at least 50 per cent and extending the repayment deadline beyond December 2023. It is also asking the government to help new businesses that were excluded from the CEBA program and to forgive a portion of other federal COVID-19 loan programs like HASCAP (Highly Affected Sectors Credit Availability Program).

Despite the long road back to normal, all major COVID support programs end on May 7, said the CFIB. A huge number of small firms are also facing major challenges with rising costs for energy, inputs and insurance (90 per cent) or hikes to government-imposed costs for carbon and payroll taxes (82 per cent). This may explain why almost three-quarters (72 per cent) of small business owners did not find the measures in the 2022 federal budget particularly helpful for their situation, said the national organization.

“We understand the government wants to close the door on many of these programs. They’re super costly. I want to end subsidies too, but if we time it too early before businesses are fully recovered we run the risk of having a bunch of failures and that’s why we need our focus at CFIB on this debt issue. If we can at least get the burden of debt off the shoulders of business owners, we believe that more of them would have a fighting chance of survival,” said Kelly. 

Now Hiring at Ideal Coffee & Wine on Ossington (Image: Dustin Fuhs)

He said small business owners also need some help from government on the cost side of the equation.

“Every single line on a business budget is under pressure. Not all of that is controlled by government but some of it is. The shortage of labour. Giant issue right now. Wage levels are going up through the roof. Many provinces have added to the problem by increasing minimum wages at this time, increasing payroll taxes like EI and CPP, those are going up. Those we believe should be frozen,” said Kelly.

“Energy costs are a huge worry on the part of all of us and small business owners. The government decided to go ahead with carbon tax increases on April 1. We believe that was a bad idea. We have been pleased to see a few provinces, Ontario and Alberta announcing an end to or a reduction in the fuel tax. That certainly will help a little bit. We should be seeing more of that across Canada.

“But the other thing the federal government had promised but didn’t deliver on was lower credit card processing fees. These are huge fees. More of our transactions these days are on credit cards, not paying the cash, cheques or even debit right now. As a result of that, the government did promise business owners that they would work with VISA, Mastercard and the banks to lower these processing fees. That was promised in 2019. Here we are in 2022, more consultation, not any action.”

Mario Toneguzzi
Mario Toneguzzi
Mario Toneguzzi, based in Calgary, has more than 40 years experience as a daily newspaper writer, columnist, and editor. He worked for 35 years at the Calgary Herald covering sports, crime, politics, health, faith, city and breaking news, and business. He is the Senior News Editor with Retail Insider in addition to working as a freelance writer and consultant in communications and media relations/training. Mario was named as a RETHINK Retail Top Retail Expert in 2024.



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