A total of 17% of small business owners surveyed are preparing to close permanently under pressure of six-figure COVID debts, the Canadian Federation of Independent Business said yesterday..Few will formally file for bankruptcy protection from creditors, analysts said..“Small firms are in for a rough recovery,” Dan Kelly, CEO of the Federation, said in a statement..“Governments can step in and help by taking concrete measures. Governments need to decide whether they will make the problem worse by raising taxes.”.The Federation in a poll of members found pandemic debts averaged $158,000. “Small businesses are feeling the financial pressure mount and seem to have much less room to manoeuvre,” said a survey,.“54% of businesses are still operating below normal revenues and 62% are still carrying unpaid debts taken on during the pandemic,” said the report. “Only 10% of Canada’s small business owners would choose to file for bankruptcy if they were unable to keep their doors open,” it added..“40% of businesses at risk of closure would simply stop operating rather than go through the bankruptcy process,” wrote analysts. “Canadian business insolvency data does not reflect these types of closures.”.The Superintendent of Bankruptcy last year reported the number of insolvencies in Canada actually fell 7% from 2020 to a total 92,572..“Insolvency is a lagging indicator,” Superintendent Elisabeth Lang testified at 2021 hearings of the Commons finance committee. “Our historical data show that there will be an increase but I don’t think it will be sudden.”.Insolvencies following the 2008 financial panic peaked at 158,441..“Volumes were noticeably affected by the 2008-2009 recession,” said a 2016 federal report..“We are keeping a very close eye on insolvency rates compared with the last significant Canadian recession in 2008,” said Lang, adding: “I am not sure it will be a crisis but it’s very difficult to predict.”.Operators surveyed in the Federation of Independent Business questionnaire were asked if they agreed with the statement: “We are actively considering bankruptcy or winding down our business.” Seventeen percent replied yes..“Bankruptcy is a major issue for Canadian small businesses in all sectors, but it does not measure the full scope of the problem,” wrote analysts. “Of all the methods business owners would use to close their business due to financial hardship filing for bankruptcy is only a small piece.”
