According to a survey by the Canadian Federation of Independent Business (CFIB), nearly one in five small business owners are preparing to close permanently under the pressure of pandemic-related debt, lagging revenues and rising costs.
In a recent study of its members, CFIB found that 54% of small businesses are still reporting below-normal revenue and 62% have outstanding debts incurred during the pandemic – which average $158,000 – according to the latest available estimates .
When respondents were asked if they agreed with the statement “We are actively considering bankruptcy or closing our business”, 17% answered in the affirmative.
“Small businesses are on the verge of a tough recovery, but governments can step in and help with concrete action,” CFIB President Dan Kelly said in a statement. A declaration published on August 18. “Governments need to decide whether to make the problem worse by raising taxes or take immediate action to prevent many businesses from disappearing for good.”
CFIB found that only 10 per cent of small business owners in Canada would choose to file for bankruptcy if they were unable to keep their doors open, while nearly half (46 per cent) of businesses at risk of closure would cease. simply their activities rather than going through bankruptcy proceedings.
“Bankruptcy is a major problem for Canadian small businesses in all sectors, but it does not measure the full extent of the problem,” CFIB said.
“Of all the methods business owners would use to close their business due to financial hardship, filing for bankruptcy is only a small part.”
Last year, the Office of the Superintendent of Bankruptcy reported that the number of insolvencies in Canada actually fell 7% from 2020 to a total of 92,572, according to the Blacklock reporter.
‘Insolvency is a lagging indicator,’ Superintendent Elisabeth Lang said in testimony before a House of Commons finance committee Meet July 7, 2o2o. “If, as many suggest, we face a recession and our GDP declines, our historical data shows that we will see an increase [in insolvencies], but I don’t think it will be sudden. I’m not sure it will be a crisis, but it’s very difficult to predict.
“We are watching insolvency rates very closely from the last major Canadian recession in 2008,” Lang said at the time, regarding the government’s preparedness for a likely increase in insolvency filings across the country. context of the COVID-19 pandemic.
Insolvencies following the financial panic of 2008 peaked at 158,441according to a 2016 federal report entitled “Ten-Year Insolvency Trends In Canada”.
“Volumes were significantly affected by the 2008-2009 recession,” the report said.