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Cash crisis and debt nightmares top small business concerns

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Only 20 per cent fully open, 30 per cent do not have cash flow to pay April bills and 39 per cent worried about permanent closure; more help needed immediately

Vancouver, April 7, 2020 – Monthly bills and mounting debt top a long list of small business worries, finds a new survey taken by the Canadian Federation of Independent Business (CFIB) over the weekend. 

“Main Street is scared that the economics of the ongoing shutdown are unsustainable,” said CFIB executive vice-president Laura Jones. “We need to do a better job figuring out how to flatten the curve on small business failure, as the situation is pretty desperate. Broadly speaking there are three big challenges—relief is slow coming for bills due now, people are falling through government eligibility cracks, and too much of the relief is in the form of deferrals and loans, which just adds to the fear of coming out of this crisis with a mountain of debt that will be difficult or impossible to repay.”  

Survey results show that many small businesses plan to use the Canada Emergency Business Account (44 per cent) with many others wanting to use it, but not being eligible (20 per cent). Only 11 per cent say they don’t need it with the rest unsure. Once running, the program will provide up to $40,000 in interest-free loans with up to $10,000 forgivable. However, it is restricted to businesses with payroll between $50,000 and $1 million. 

“These loans can’t be available fast enough and we strongly recommend eliminating the payroll test and making the $10,000 forgivable portion a simple grant that is available quickly,” said Jones. 

Rent is one of the biggest month-to-month costs a small business needs to shoulder. For those that pay rent (65 per cent of those surveyed) 61 per cent paid or plan to pay in full for April. About one in four have deferral agreements in place with landlords. Most of the rest could not pay their rent in full and don’t have an agreement in place (7 per cent). 

“April rent was really tough, and many businesses will find May a total nightmare if things don’t change,” said Jones. “Provinces should move to reduce property taxes and introduce a rent subsidy for hard hit business like those forced to close by provincial essential services rules."

Other survey results relevant to cash flow and debt include: 

  • 30 per cent report they do not have cash flow to cover April bills;
  • 42 per cent report having an easy time with banks and 26 per cent report they are not;
  • 50 per cent do not think provincial governments are doing enough to help business (32 per cent think they are doing enough, 16 per cent don’t know);
  • 63 per cent do not think they will be able to make up for lost revenues when the COVID-19 emergency is over:
  • 90 per cent are worried customers will reduce or delay spending, even when COVID-19 is over.

Based of feedback from small business members CFIB is making the following recommendations: 

  • Make the Canada Emergency Business Account (CEBA) loans available as soon as possible, eliminate the payroll test and make the $10,000 forgivable portion a simple grant that is available quickly with a minimum of qualification criteria and administrative hassle. 
  • Provinces should provide rent subsidies to cover fixed costs of businesses hard hit by the COVID-19 crisis. CFIB continues to recommend provincial hardship grants of $5,000 a month to those forced to fully or partially close by provincial governments and those most affected by revenue losses. Ontario’s NDP opposition suggested a similar measure providing for a 75 per cent subsidy up to $10,000 in rent for small business that CFIB supports.
  • Business owners and the self-employed should be able to have some limited earnings while remaining eligible for the Canada Emergency Response Benefit (CERB)
  • Provinces should move immediately to reduce commercial property taxes by a minimum of 25 per cent with the criteria that the relief be passed on to commercial renters.  

“If we don’t do a good job helping Main Street businesses survive this today, the cascading effects will be felt for years to come. They are the job providers and creators for millions of Canadians. They are the connective tissue of our communities. Small business really is too big to fail,” Jones concluded.

Read the full survey results for more details.

For media enquiries or interviews, please contact:
Milena Stanoeva, CFIB
647-464-2814
[email protected] 

About CFIB
The Canadian Federation of Independent Business (CFIB) is Canada’s largest association of small and medium-sized businesses with 110,000 members across every industry and region. CFIB is dedicated to increasing business owners’ chances of success by driving policy change at all levels of government, providing expert advice and tools, and negotiating exclusive savings. Learn more at cfib.ca.