StatCan and CFIB release data on business bankruptcies
by CM Staff
The research suggests that rising operating costs, coupled with a lack of demand and hikes in interest rates have also contributed to a surge in business closures and insolvencies.
TORONTO — Data from Statistics Canada indicates that business bankruptcies have been on an upward trend since mid-2021; however, another report from the Canadian Federation of Independent Business says only 10 per cent of business owners would file for bankruptcy in the event that they closed down permanently.
“Official Canadian data on small business bankruptcies doesn’t account for zombie companies or businesses that would rather wind down than file for bankruptcy. Our research provides a broader perspective on business insolvencies in Canada and shows that the rising number of small business bankruptcies is just the tip of the iceberg,” said Simon Gaudreault, chief economist and vice-president of research at CFIB in a statement.
CFIB’s recent data reports 54 per cent of business owners are yet to return to normal, pre-pandemic revenue levels. Nearly two out of three Canadian businesses are still carrying pandemic debt, and only 10 per cent have been able to pay it back in full.
The research suggests that rising operating costs, coupled with a lack of demand and hikes in interest rates have also contributed to a surge in business closures and insolvencies.
“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,” said Dan Kelly, CFIB president in a statement.
“With an average debt of $158,000 per business and mounting cost pressures on virtually every line of a small business budget, it’s no wonder many businesses are unable to pay off their debt and continue to struggle.”
CFIB has prepared some recommendations for the government to help small businesses keep operating costs down.
- Increasing the forgivable portion of the Canada Emergency Business Account (CEBA) loan to at least 50 per cent.
- Extending the repayment deadline for CEBA loans to qualify for partial loan forgiveness to December 2024
- Increasing the small business deduction to $600,000 (currently $500,000)
Freezing planned federal tax hikes, including the 2022 increase in CPP, EI, carbon and liquor taxation, and reducing the provincial payroll tax burden - Immediately implementing the promised reduction in credit card fees for small merchants.
