A sign on a shop window indicates the store is closed in Ottawa, Monday March 23, 2020. THE CANADIAN PRESS/Adrian Wyld

Indebted Canadian businesses more ‘fragile’ than during 1st wave, BDC economist warns

Study finds small and medium-sized businesses hit hard by the crisis

MONTREAL — A new study says many Canadian entrepreneurs are focused on shoring up their balance sheets after recording a drastic drop in revenues and mounting debt during the first wave of COVID-19.

The Business Development Bank of Canada survey says the top priority of business owners is getting their financial houses in order, including reducing operating costs and improving cash flow.

Investing in technology was also a priority for entrepreneurs, according to the study which also listed a focus on remote work, online sales and reviving growth as other key areas.

The study found that small- and medium-sized businesses were hit hard by the crisis, with 76 per cent reporting a decline in revenues and profits during the pandemic.

Nearly half ending up laying off staff, while about 39 per cent of entrepreneurs took on more debt to survive, the BDC said.

Still, the BDC study said 87 per cent of entrepreneurs are confident they will make it through the crisis.

Pierre Cleroux, BDC’s vice-president of research and chief economist, says his “biggest worry” is the high debt levels of many businesses.

“If there’s a second wave and we have to go into lockdowns, the good news is businesses are more prepared,” he said in an interview. “They’ve worked hard to be more efficient, reduce costs and be more present online.

“The bad news is they are more in debt than they were six months ago, so they are more fragile.”

Cleroux said the transition to remote working and the focus on technology and online sales has been a significant shift.

“I never saw such a momentum in terms of investing in technology,” Cleroux said. “This is going to help them in the long run.”

More than half of entrepreneurs surveyed said remote working helped their business innovate and improved employee productivity.

“For many years, businesses were not really open to remote work because they didn’t think it would be beneficial,” Cleroux said.

“The pandemic has really changed that perception.”

Only one in five entrepreneurs said teleworking hurt innovation or productivity.

The BDC study also found that the pandemic has changed the spending habits of Canadians.

The research said more than 83 per cent of Canadian shoppers were willing to pay more for local products, while 56 per cent made more online purchases during the pandemic.

The study said the importance of e-commerce was highlighted by business owners and that companies that were already selling online reported being less affected by the lockdown.

The BDC said the study is based on two surveys, with 1,000 Canadian small- and medium-sized enterprise leaders and 2,000 consumers polled in May and June.

This report by The Canadian Press was first published Oct. 7, 2020.

Business

Get local stories you won't find anywhere else right to your inbox.
Sign up here

Just Posted

Guy Pelletier, vice-president of the Red Deer region for Melcor Developments. (Contributed photo).
Melcor has to redesign new neighbourhood after Molly Banister decision

City council disagreed with administration’s recommendation to scrap road plans

The Red Deer and District Community Foundation needs to sell more tickets to host a raffle that will benefit the Women and Girls Endowment Fund.
$135K in funding available in central Alberta for charities advancing gender equality

The Red Deer & District Community Foundation is providing $135,000 to local… Continue reading

Leslie and Rod Stewart won $100,000 on the Aug. 4 Lotto Max draw. The couple plans to travel when it is safe to do so. (Photo contributed)
Red Deer couple wins $100,000 lottery prize

LOTTO MAX ticket purchased in Valleyview

Alice Kolisnyk, deputy director of the Red Deer Food Bank, says the agency expects an increase in demand as the COVID-19 pandemic continues. Every new subscription to the Red Deer Advocate includes a $50 donation to the food bank. (Photo by BYRON HACKETT/Advocate Staff)
Support the food bank with a subscription to the Red Deer Advocate

The community’s most vulnerable members are always in need of a hand,… Continue reading

Sharon Hickin, general manager of the Days Inn Sylvan Lake and the new Lake House Diner, poses for a photo outside the new restaurant. Photo by Megan Roth/Sylvan Lake News
Pandemic puts extra hurdles in place for new Sylvan Lake businesses

Over the past seven months numerous new businesses have opened in Sylvan Lake, despite the pandemic

Email letters to editor@interior-news.com
The problem isn’t dispatching, it’s a shortage of ambulances

Having worked in EMS for more than 43 years, and having lobbied… Continue reading

file photo
Maskwacis RCMP investigate pedestrian fatality

Collision on Highway 2A causing fatality still under investigation.

March 14, 2019 - Head shot of Toronto Star columnist Heather Scoffield.    DAVE CHAN FOR THE TORONTO STAR
Opinion: Canada is missing a recovery plan

The glitches should have been a sign of what was to come.… Continue reading

A recent Lock it or Lose it campaign at Parkland Mall found only 35 per cent of drivers took action to make their vehicles less tempting to criminals. (Photo by SUSAN ZIELINSKI/Advocate staff)
Michael Dawe: Parkland Mall transformed region’s retail landscape

Fifty years ago, on Nov. 3, 1970, there was a major boost… Continue reading

Los Angeles Dodgers celebrate after defeating the Tampa Bay Rays 3-1 to win the baseball World Series in Game 6 Tuesday, Oct. 27, 2020, in Arlington, Texas. (AP Photo/David J. Phillip)
Fitting finale: Dodgers win title, Turner tests positive

Turner returns to the diamond about an hour after the game

Most Read