To say the coronavirus pandemic has been hard on businesses in Canada is an understatement. And yet, despite this, we’ve seen plenty of data in the news showing that while 2020 was a tumultuous year for many reasons, there were actually fewer corporate restructurings and bankruptcies among small and medium businesses in Canada compared to 2019. This was directly related to government initiatives that supported financially vulnerable businesses, delaying bankruptcy for many. In short, the government’s direct financial support to, for example, subsidize wage costs or provide loans, allowed many businesses to survive 2020.
However, when the stimulus and government support come to an end, those businesses that were already vulnerable will find that repaying both pre-coronavirus and post-coronavirus debt may not be possible, and that the possibility of bankruptcy looms large.
Unfortunately, we now know from recent CFIB data that there are a staggering number of businesses that fall into this category, with millions of livelihoods at stake. So, while 2020 did not see an upsurge in bankruptcies compared to 2019, it’s very possible that 2021 could see a significant spike.
While it’s difficult to predict when government subsidies will end, businesses that plan ahead will have a far greater chance of survival post-pandemic.
With that in mind, there are some proactive steps business owners concerned about their financial position should consider if they are looking to others to assist them over the COVID-19 hump.