The end of the government's pandemic-era support has left small businesses bracing for the worst
Many small businesses in Canada are faced with the possibility of bankruptcy after the government’s pandemic-era support ended last month, as reported in an article by Yahoo!finance.
Small businesses employing less than 100 people provide jobs to nearly two-thirds of the 12 million private workers in Canada, marking their importance to the economy. Lobby groups and economists have warned that an increase in bankruptcies among that cohort – by 38% in the first 11 months of 2023 – will impact economic growth.
About 900,000 small business were given a deadline last month to repay their interest-free loans of $60,000 that the government made available to them during the pandemic. According to Finance Minister Chrystia Freeland, a fifth of them have yet to repay those loans.
Katherine Cuplinskas, a spokesperson for the finance minister, said the Department of Finance was not expecting a negative impact on the country’s economy when it comes to the repayment of the loans. She said those who have received the loans were given full information regarding the timelines and were able to plan accordingly.
“There are tens of thousands, if not hundreds of thousands, of businesses that remain viable, but will not be able to outrun their debt,” said Dan Kelly, president of the Canadian Federation of Independent Businesses (CFIB).
He said many debts could only be repaid if they borrowed from banks at a higher interest rate. CFIB estimated that about 225,000 of businesses that have paid of their loans did so by taking out a bank loan while interest rates faced a 22-year high.
Businesses which did not get a loan but missed the deadline were required to regularly pay for two years with an annual interest of 5%.
“We do anticipate... a rise in insolvencies over the next six months or so,” said Stephen Tapp, chief economist at the Chamber of Commerce.
The Conference Board of Canada (CBC) has forecasted that consumer spending in 2024 will fall by a greater amount than the previous year. Pedro Antunes, CBC’s chief economist, has said that the receding support from the government will leave small businesses exposed to higher costs and a drop in sales.
