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Debts Up, Profits Down At Small Businesses Across N.S. And N.B.

By Scott Pettigrew Feb 13, 2023 | 5:00 AM

The darkest days of the pandemic may have been nearly three years ago, but small business owners are still carrying the burden of Covid-19 in more ways than one.

A new survey from the CFIB, conducted near the end of 2022, shows that 52 per cent of Nova Scotian small business owners still carry pandemic-related debt. And the average debt from the pandemic is $102,000.

Adding to that strain, 50 per cent of these businesses are still experiencing below-normal sales. A full 15 per cent believe they are at risk of shutting down.

The numbers are not much better in New Brunswick. There, 62 per cent of businesses have pandemic-related debt, although the average debt is a bit smaller, at $94,000. Nearly half of New Brunswick small businesses are operating at below-normal sales and 16 per cent say they are at risk of closure.

Frederic Gionet, a senior policy analyst for CFIB in Atlantic Canada, said the increased interest rates have made it harder for small businesses to pay off their pandemic debt.

“Any business that has financing or lines of credit–a lot of them are variable rates,” explained Gionet.

Not only have those businesses taken on more debt during the pandemic, many of them have used their savings or borrowed against their properties to keep things afloat. Now, Gionet says, “there’s a double whammy as interest rates are coming back to haunt them.”

Most businesses’ debt comes from the federal government’s CEBA loan program, which gave eligible businesses as much as $60,000. Businesses can get 33 per cent of that loan forgiven if they pay the balance by the end of 2023. If they can’t, interest will start accruing.

But the CFIB and other business groups are lobbying for a further extension from the feds. Gionet says their surveys show that 40 per cent of businesses have not been able to make any repayments yet, less than a year before the deadline. The CFIB suggests that 50 per cent of their loans should be forgiven.

“In the end, it’s either [more leeway from the federal government] or many businesses will not be able to make it. They need all the help they can get. This was not anything of their own doing. They didn’t ask for this pandemic and they were probably the biggest losers out of every group.”

Gionet also explained that small businesses are still trying to deal with inflation, the increased cost of labour, and a labour shortage, all of which have added to their burden.

Gionet says two big factors are keeping sales from returning to normal. First, people’s shopping habits changed drastically early in the pandemic; more people got comfortable shopping online and they haven’t returned to brick-and-mortar stores.

Another large factor is people tightening their belts. With everyday essentials like food and fuel getting more expensive, and as mortgage payments balloon, consumers are watching what they spend.

“More recently, people have been cutting,” he said. “The latest reports show that restaurant sales are in constant decline — and that’s after having small peaks early on in the year when everything was reopened.”

CFIB isn’t only monitoring the financial struggles of small business owners through its surveys. The organization also tracks how many of these entrepreneurs are still under “pandemic stress.” The latest survey shows 64 per cent of Nova Scotia’s small business owners are under this mental strain. In New Brunswick, it’s even higher, at 69 per cent.

“We’ve been constantly measuring the mental health aspects of this,” said Gionet. “They’re working 80 hours a week since they can’t find the labour. They’re taking on additional roles in their small businesses. It’s all on the owners to take up the slack. They’re feeling that they’re going uphill without a break, so it is increasing the stress and it is increasing the number of people who are considering closing their business.”

Derek Montague is a reporter with Huddle, an Acadia Broadcasting content partner.


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