Small businesses may be forced to lay off staff or close to repay pandemic debt, survey finds

Bank of Canada small business pandemic CEBA

Many small businesses in Ottawa are struggling with pandemic-related debt and attempting to repay that debt by the end of 2023 would make them unable to invest in or expand their business or even force layoffs or closure, a new survey from a prominent local business group finds.

“Pandemic-related debt” was selected by about 70 per cent of survey respondents as the biggest issue currently facing their business, according to the survey conducted earlier this month by the Ottawa Coalition of Business Improvement Areas. Other factors were inflation, supply chain issues, and a labour shortage.

More than half of respondents (57 per cent) said they were planning to repay the debt by Dec. 31, 2023 in order to receive loan forgiveness from the federal government on its Canada Emergency Business Account (CEBA) loans.

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However, nearly 90 per cent said repayment by the deadline will negatively impact their business; they said they might have to lay off staff (almost 40 per cent), reduce inventory (almost 40 per cent), or delay expansion (about 45 per cent) or reinvestment (just over 60 per cent). In some cases, the businesses said they could even close (just over 40 per cent).

The survey was conducted to evaluate the ability of businesses to repay CEBA loans by the end of the year in order to receive 33 per cent loan forgiveness from the federal government.

“It echoes what we have seen with other nationwide surveys, as well as the general communications we have been receiving from Ottawa businesses,” said OCOBIA president Michelle Groulx. “In late 2022, businesses started to receive statements from their banks regarding payment of CEBA and the deadline of Dec. 31, 2023 – this had certainly set off alarms.”

Businesses are recovering from the pandemic “at different paces,” she explained, and a one-size-fits-all approach to debt repayment won’t work for everyone.

While hardest-hit sectors have various reasons for “slower recovery,” the extended closures of their businesses due to COVID must be taken into consideration, Groulx said.

“We are already seeing a rise in insolvencies in Canada and especially here in Ontario,” she added. “We want to support our small businesses in any way we can.

“We know that pandemic-related debt is one of the highest burdens they are facing. We hope the policymakers, especially the local federal representatives, consider this data in the budget and will extend the forgiveness of debt from 33 per cent to a higher amount to help the hardest-hit sectors.”

A total of 898,271 businesses across Canada received CEBA loans and $49.2 billion in funds was approved. Of the businesses approved for loans, 40.76 per cent are in Ontario.

A total of 128 businesses responded to the OCOBIA survey, 77 per cent of which are in the hospitality, retail and personal care services sectors. Just over half of respondents have been in business more than 10 years and 59 per cent have fewer than 10 employees. Almost 70 per cent say their revenues are down from 2019.

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