by Morinville Online Staff
Although StatsCanada data shows a rise in business insolvencies since the middle of 2021, a new report from the Canadian Federation of Independent Business (CFIB) – Small Business Insolvency: The Tip of the Iceberg? – indicates that 10 per cent of Canadian businesses would file for bankruptcy if they were to close 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 CFIB Chief Economist and Vice-President of Research Simon Gaudreault.
The business organization’s recent report data indicates that 59 per cent of Alberta business owners still have not returned to their normal pre-pandemic revenue levels. Additionally, sixty-six per cent are still carrying pandemic debt, of which only 11 per cent have been able to pay it back in full.
Pandemic pressures and closures are not the singular cause of hose woes. CFIB says rising operating costs and increased interest rates, coupled with a drop in demand for products and services have affected the province’s businesses, causing 21 per cent to strongly consider declaring bankruptcy or winding their businesses down.
“Alberta small businesses are in for a rough recovery, but governments can step in and help by taking concrete measures,” said CFIB Alberta Provincial Affairs Director Annie Dormuth. “The Alberta government has provided some cost relief in the form of halting the collection of provincial fuel taxes and expanding utility rebates. These types of actions and more like lowering the small business tax rate and increasing the threshold would help small business recovery.”
CFIB urges the federal government to do the following to assist businesses:
• Increasing the forgivable portion of the Canada Emergency Business Account (CEBA) loan to at least 50%
• Extending the repayment deadline for CEBA loans to qualify for partial loan forgiveness to December 2024
• Increasing the federal 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
• Immediately implementing the promised reduction in credit card fees for small merchants
The full research snapshot can be found on the CFIB website.