When the pandemic was first declared in 2020, numerous businesses were forced to shut down by the government in the name of COVID-19 restrictions. During that time, thousands of small businesses struggled to bring in any income, resulting in price hikes, moving to strictly online sales — or worse, permanent closure.
Now, after two years of back and forth of lockdowns and reopening, some businesses may just have to call it quits for good.
The Canadian Federation of Independent Business (CFIB) put out a statement on their website, with president Dan Kelly commenting on this rough situation:
Small firms are in for a rough recovery, but governments can step in and help by taking concrete measures.
Governments need to decide whether they will make the problem worse by raising taxes or take immediate actions to keep many businesses from disappearing for good.
Kelly also added that during the pandemic, “government loans and subsidies helped many small businesses to stay open, but now those programs have closed, despite the fact that a majority of businesses are still not back to their pre-pandemic sales levels.”
The CFIB also published a report called “Small Business Insolvency: The Tip of the Iceberg?” where the organization thoroughly explained the bankruptcy issues Canadian businesses are dealing with:
According to recent exclusive CFIB data, only 10% of Canada’s small business owners would choose to file for bankruptcy if they were unable to keep their doors open. 46% of businesses at risk of closure would simply stop operating rather than go through the bankruptcy process. Canadian business insolvency data does not reflect these types of closures.
As we emerge from the COVID-19 crisis, other challenges continue to deeply affect Canada’s small businesses, including struggles to return to normal revenues, the weight of the COVID-related debt businesses were forced to take on to pivot and survive, rising costs on virtually every business expense and a gripping shortage of labour.
The report continued, saying that “54% of businesses are still reporting below-normal revenues and 62% are still carrying unpaid debt taken on during the pandemic, $158,000 on average, according to the latest available estimates.”
Unfortunately, bankruptcy is a major issue for small business owners in Canada, yet there is still another problem.
A survey done by CFIB claims that “bankruptcy is not the first thing business owners think about when they can no longer keep their doors open.” Instead of shutting down in the near future, business owners wind down slowly to avoid going through the bankruptcy process.
“Only 10% of the businesses considering bankruptcy or closing would most likely do it by filing for bankruptcy,” said the CFIB report.