Small businesses rack up $139 billion in COVID-19-related debt: CFIB

Despite the lifting of lockdown restrictions in regions across the country, many small businesses have continued to rack up debts related to the COVID-19 pandemic, with the collective debt level in Canada hitting $139 billion.

That's according to a new report released Tuesday by the Canadian Federation of Independent Business (CFIB), an industry group representing 95,000 small businesses across the country.

The report, based on surveys of members conducted in May and August, found that the average amount of debt related to the COVID-19 pandemic taken on by small business owners is $169,957. While that amount is largely unchanged from a previous survey conducted in February, the debt level among businesses in the hospitality sector has skyrocketed to an average of $333,174. Collective debt levels have also jumped since February, from $135 billion to $139 billion.

In fact, the debt loads have gotten so high that some business owners (13 per cent) are concerned about ever being able to repay the debt taken on through the pandemic, which could lead to more permanent closures across the country, said Corinne Pohlmann, CFIB's senior vice-president of national affairs.

"For those businesses that are more customer-facing, the debt loads have gotten a lot worse over the course of the last several months," Pohlmann said in an interview.

"This continues to tell us that the pandemic is far from over, and it's still having a pretty significant impact on so many businesses that we see down main streets everyday."

The highest average debt levels are among businesses located in Alberta, where the average debt load per business hit $335,279. The average debt level in Ontario was $190,608 per business, and $129,348 per business in B.C. The lowest debt level was $74,708 per business in Atlantic Canada.

The expected time for how long it will take businesses to pay down debt varies depending on whether companies were able to stay open through lockdown restrictions. Of the businesses that were partially open or fully closed through the pandemic, 40 per cent expect they will be able to pay off their debts within two years. Nearly a quarter (24 per cent) of these businesses are concerned about ever being able to pay back what they owe.

When it comes to all businesses, the report found that 76 per cent say it will take longer than a year to pay off debts accrued through the pandemic.

Pohlmann says the report shows how critical it is for businesses to remain open, particularly as concerns about a fourth wave emerge.

"The biggest hurdle for recovery is the debt that has been accumulated throughout this pandemic," Pohlmann said.

"We have a lot more tools in our toolkit now and we better understand what we need to do to protect ourselves, our employees and customers… We need to find a way to not so straight back to shutdowns going forward and help these businesses continue to make money."

Some provinces, such as Quebec, have opted to introduce proof-of-vaccination systems in part to help keep businesses open. Multiple news outlets have reported that Ontario Premier Doug Ford will introduce a COVID-19 vaccination passport program this week in the hopes of avoiding more lockdowns.

Taylor Matchett, a research analyst at CFIB and the lead author of the report, says given so many businesses are still in a "challenging and worrisome financial situation", continued government support will be critical.

"Businesses need stay-open strategies that avoid future lockdowns and business closures, and government in general also needs to make sure that they are not pulling the plug on business supports too early," Matchett said.

The CFIB report is based on two online surveys of members, including one survey of 2,878 members in August, and another of 5,361 members in May.

Alicja Siekierska is a senior reporter at Yahoo Finance Canada. Follow her on Twitter @alicjawithaj.

Download the Yahoo Finance app, available for Apple and Android.