KAWARTHA LAKES-Seven in 10 small business owners have taken on debt due to COVID-19, with the average now reaching almost $170,000 per business, according to a new report from the Canadian Federation of Independent Business (CFIB). In total, small businesses in Canada now owe a collective $135 billion.
“Over the last six months, the average debt taken on by small businesses to deal with COVID-19 has grown significantly,” said Laura Jones, Executive Vice-President at CFIB. “While many businesses had previously reopened and were attempting to regain lost sales, the second wave and the restrictions that came with it are putting a massive wrench in an already slow recovery for small businesses.”
After adjusting the data to reflect the entire economy, CFIB estimates that the total debt taken on by Canadian small businesses as a result of COVID-19 as of early February is $135.1 billion, a significant increase since CFIB’s previous estimate of $117 billion in July 2020.
Of businesses that have taken on debt, three quarters (76 per cent) say it will take them over a year to repay, with 11 per cent of this group expressing concern that they may not be able to repay their COVID-19 related debt at all. What’s more, when asked how long it would take them to return to typical profit levels (not including any debt repayment), four in 10 businesses say it will be at least a year from now, if not more, until they expect to see normal profits.
CFIB’s #SmallBusinessEveryDay campaign encourages Canadians to choose to shop at local, independent businesses every time they can to support their recovery. Governments can also help by ensuring that support programs match business needs and can be easily accessed.
“Small businesses need our support through this challenging time,” added Taylor Matchett, a research analyst at CFIB and the lead author of the report. “We must also keep in mind that businesses are much more fragile now than at the beginning of the pandemic, and every effort should be made to keep businesses open while managing the health implications of the virus.”
Read CFIB’s full research report for more details: Small Business Debt and Profitability: The COVID-19 Impact
The total COVID-19-related debt estimate for Canadian SMEs is based on results from CFIB survey results and Statistics Canada business counts for December 2020. For additional details on how the estimate was calculated, please refer to the methodology section of the full research report.
Survey results come from CFIB’s Your Voice Survey – February 2021, which was taken online by 3,554 small business owners in Canada from February 4 to 8, 2021. For comparison purposes, a probability sample with the same number of respondents would have a margin of error of +/-1.6%, 19 times out of 20. Results from this survey are preliminary at the time of reporting.