Building Bridges for Business Owners

Beth Graddon

Business owners remain financially stranded in Canada.  According to a new survey by the CFIB, 33% of business owners have had to dip into their personal savings just to stay afloat during the pandemic crisis, 26% of them have had to increase credit card debt, and 8% of them tapped into their retirement savings early. That scenario is bolstered by a July 15 survey from Stats Canada which confirms the extent of the financial burden borne by business owners. A continued lifeline is critical to clinch Canada’s economic recovery.

In their report entitled “Canadian Survey on Business Conditions: Impact of COVID-19 on Business in Canada, May 2020” Statistics Canada gives us  a glimpse of the impact the pandemic has had on the business sector:

• Revenue Declines:  51.6% of Canadian businesses experienced a decline in revenue for April of more than 30% compared to April 2019, while 35.3% said revenues were down at least 50%
• Funding Access:  63% of businesses were approved for funding from government programs or credit from external providers (including the CEWS, and CEBA)
• Rent Deferrals:      23.6% of businesses had their rent or mortgage payments deferred.
• Staff Reductions:  17.4% were forced to lay off more than half of their workforce while 40% of businesses reduced staff hours or shifts and  28.4% laid off staff. But on the good news side, 65.8% expect to maintain the same number of employees over the next three months.

The reduction in business revenues is of particular concern for governments:   it also means a significant reduction in tax revenues at a time when government debt has grown at unprecedented rates as a result of the pandemic and the support programs implemented.

The bottom line:  the challenge is to support the entire economic eco-system.  If Canadians are to get back to work, and receive tax-funded benefits, Canada must also continue to provide a bridge to its business owners to survive past the financial ravages of the pandemic. 

Further, from a future tax policy point of view, helping business owners then build up retained earnings, to position themselves against future shocks and Black Swan events, will be most important.

Additional educational resources: Come to the September 30 CE Summits for further discussion and information on "Financial Fallout: Audits and Bankruptcies"

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