The majority of Canadian small businesses survived the pandemic, but their journey to a full recovery is far from complete. To put the crisis behind them, they\u2019ll have to contend with its after-effects: added debt loads, supply-chain disruptions and labour shortages\u2014not to mention the spectre of further COVID waves. They\u2019ll also have to compete with new entrants and larger rivals, and adapt to changes in the way we do almost everything, from shopping and exercising to business meetings. And they\u2019ll need to do all of this as unprecedented government support is phased out.<\/p>\n
Amid these challenges, Canada\u2019s small businesses will also find opportunities: in the efficiencies and expanded market access that accompanied a pandemic-driven jump to digital commerce, and in a rising consumer preference for \u201cbuying local.\u201d An RBC survey<\/a> found three-quarters of Canadians plan to spend more at local businesses as the economy reopens. Six in 10 have sought out or will seek out businesses with BIPOC owners, and half wanted to support those with 2SLGBTQ+ ownership. <\/p>\n Canada\u2019s small businesses have already proven their resilience. To seize on the opportunities this historic crisis created, they\u2019ll need to call on that spirit again. Building on our 2020 report, Small Business, Big Pivot<\/a>, we\u2019ve identified four major challenges likely to confront them in the months ahead. With small firms accounting for more than 40% of Canada\u2019s private sector GDP, their success in overcoming them will be the country\u2019s success.<\/p>\n The pandemic choked the flow of cash to many small businesses, forcing them to borrow to stay afloat. According to a recent survey <\/a>from the Canadian Federation of Independent Business, seven in 10 small businesses took on debt due to the crisis, with additional borrowing hitting an average $170,000. One third of businesses thought it would take more than two years to repay that debt and another 13% were concerned about their ability to ever repay. Half of respondents said debt repayment was one of their biggest challenges. <\/p>\n Consumer-facing businesses that bore the brunt of COVID restrictions were more likely to have accumulated debt, with average borrowing in the hospitality sector twice as high as in other industries. Even accounting for the forgivable portion of CEBA loans (up to $20,000 if repaid by the end of 2022) and an aggregate increase in business deposits that suggests some firms have cash to spare, many continue to carry a daunting debt load. Though government programs and payment deferrals helped lower <\/a>the small business default rate in the second half of 2020, some companies will nevertheless face financial challenges as support is phased out.<\/p>\n Debt overhang will drag on small business owners in other ways. A March 2021 CFIB survey<\/a> found half of business owners that borrowed to get through the crisis will have to reduce their salaries to manage debt payments\u2014a tough pill to swallow for those who tapped into personal resources to support their businesses. And it likely hindered their growth plans\u2014 in a recent Statistics Canada survey<\/a>, larger businesses were nearly 50% more likely to be planning expansion or acquisitions in the next year.<\/p>\n1. The debt overhang<\/h4>\n
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