Debt burden mounts for small business

Small business debt totals $139 billion due to Covid, says CFIB

AS THE BATTLE against Covid-19 has yet to ebb, the debt burden of Canadian small businesses continues to mount, new research suggests.

A new poll from the Canadian Federation of Independent Business (CFIB), suggests businesses that have taken on debt during the pandemic now owe an average of $170,000. For those in the hospitality sector, that figure nearly doubles to $333,174.

Collectively, the CFIB estimates small businesses owe a total of $139 billion due to Covid, up from $135 billion in February.

“While the overall small business debt load due to Covid-19 has remained stable over the past six months, the actual repayment of this debt will be the next big obstacle that small businesses will face,” says Corinne Pohlmann, CFIB’s senior vice-president of national affairs. “Especially as many are still seeing a slow pick-up in revenues, capacity restrictions and uncertainty heading into the fall and winter months.”

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Seventy-six per cent of business owners polled said it will take them at least one year to repay their debts. Eighty-seven per cent of business owners in the hospitality sector said it will take at least two years, with one-in-four expressing concern they may never be able to clear their pandemic-induced debt.

“When we look more closely at the data, we can see two very different narratives emerge between businesses that faced lockdowns and those that remained open,” adds Taylor Matchett, a research analyst at CFIB and author of the report. “We have heard countless stories from members who have not been able to make a dent in repaying their debt. Higher operating costs and lower-than-normal sales make it seem like a distant reality.”

The CFIB estimates 39 per cent of small businesses in this country are back up to normal sales levels, and is urging governments to implement provincial “stay open” strategies and to avoid another lockdown, as well as extending the repayment term for the Canada Emergency Business Account loan to December 31, 2024 and provide additional rounds of funding through provincial grant programs.

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“With a federal election on the horizon, this is a pivotal moment for all parties to show their commitment to small business priorities. Without continued financial support and the opportunity to keep making sales, uncertainty around survival and worry about debt will continue to plague small business owners,” adds Pohlmann.

The findings come from two separate polls. The first survey, which included nearly 2,900 business owners, was conducted in early August and has a margin of error of plus or minus 1.8 per cent 19 times out of 20. The second survey included more than 5,300 business owners being polled between May 5 and May 31. That poll has a margin of error of plus or minus 1.3 per cent 19 times out of 20.