TORONTO – BUSINESS – “For a small business owner who has struggled during the pandemic, it’s not just about the money. It’s also about helping them to better understand their relationship with credit and how best to pay back these loans,” said Jeff Brown, Small and Medium Business Leader, Equifax Canada. “Small business owners are grappling with a lot and banks need to be more than just a conduit for these emergency funds. Banks have an opportunity to counsel small business owners on how to pay down their debt as soon as possible to avoid interest accruals and possible interest rate increases,” noted Brown.
Brown says, “Some small business owners may be expecting or hoping for some level of debt forgiveness, and greater attention would need to be paid by policy makers and financial institutions alike to ensure that getting through the pandemic remains a priority.”
While most financial institutions and governments are quick to tout their commitment to small businesses, a recent survey from Equifax Canada conducted in advance of Small Business Month indicates that despite pandemic support programs, over half feel that they are not supported by their banks or government. Within a nationwide panel of 300 small business owners, 52 per cent said this about their banks and 62 per cent felt this way about government.
Many small and medium businesses have struggled to get through the pandemic. To survive, they’ve taken out loans and accessed emergency benefit programs like the Canada Emergency Business Account (CEBA). Almost half of the survey respondents (46 per cent) say they have secured a private or government loan. Interestingly, 56 per cent of respondents feel that they have enough credit from the government to meet their 2021 Q4 needs, and 77 per cent agree that they have enough credit from their suppliers to get by, especially those whose businesses have been operating for three years or more.
Confidence, Challenges and Concerns
Despite their debt burdens, 68 per cent of small business owners surveyed feel confident that their business will recover in 2022, and those in the online retail space and whose businesses have been operating 3-5 years are feeling very confident. Those in the online retail/e-commerce and construction industries are the most optimistic about returning to pre-COVID normal in the last quarter of 2021. Businesses that have been operating for 6+ years are significantly more likely to state that they are less confident than businesses that have been operating for less time (27 per cent versus 12 per cent of those <6 years).
Small business owners who took part in the survey said the cost of goods is their leading concern, with almost half (47 per cent) worrying about this, followed by customer demand (42 per cent), supplier product availability (39 per cent), and staffing (33 per cent). Those who are not confident in their ability to recover in 2022 are significantly more likely to be concerned about their ability to repay loans (26 per cent versus 18 per cent of those who are confident).
“In offering support to a small business owner, we must recognize that each one is unique and at a different point in their journey as an entrepreneur,” added Brown. “It’s true that some have struggled, but others have thrived and adapted successfully to the changes forced onto them by the pandemic. For many operating in industries like online retail, travel, and food and beverage, they will be among the first to say that their industry has permanently changed because of the pandemic.”
Pandemic Pivots
Survey results demonstrate that small business owners are resilient and will continue to pivot as necessary during the pandemic:
- Four-in-ten (39 per cent) created or grew their online business strategy, with around two-thirds (63 per cent) of these individuals having offered curbside pick-up, and half (50 per cent) offering home delivery.
- Those whose businesses made $100k+ revenue last year were significantly more likely to state that they took on extra debt/credit during the course of the pandemic.
- Almost half of those who took on extra debt/credit expect to repay it by the end of 2022.
According to Brown, historically many small businesses have had limited access to commercial credit. Less than a quarter of the smallest enterprises requested credit in 2018 to fuel growth, partly reflecting access to commercial credit products. The share of small businesses requesting credit tends to lag. For some, lower approval rates will push them to personal credit. Their credit needs tend to be much lower and geared to working capital.
Equifax Canada is committed to providing insights to financial institutions and all levels of government to help small business owners navigate these difficult times. A priority remains to help small business owners better understand their relationship with credit, which the survey shows a good number of entrepreneurs need:
- Six-in-ten (59 per cent) small business owners are aware that a business can obtain its own business credit report, with only 30 per cent knowing how/where to obtain one, and 29 per cent not knowing how/where to obtain one.
- Of the 59 per cent who know of the business credit report, only 40 per cent know what their business’ credit score is, while a little more than half (55 per cent) admit that they don’t know.
* Equifax Canada commissioned Leger to conduct an online survey with 300 Canadian small (255) and medium-sized (45) business owners/leaders/decision makers within the Food, Construction, Retail, and Travel Industries. It was completed between August 20 and 29, 2021, using Leger’s online panel.