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Dan Kelly, president and chief executive of the Canadian Federation of Independent Business, speaks in Toronto on Sept. 11, 2014.

Chris Young/The Canadian Press

As the federal Finance Department busily crafts a coming budget to get Canada’s economy back up and running in 2021, Dan Kelly has an important message about the wobbly legs of the country’s small-business community.

“A strong wind could blow down some of these businesses right now.”

Mr. Kelly, president and chief executive of the Canadian Federation of Independent Business, chatted on Wednesday, the day before the publication of the small-business organization’s prebudget submission to Finance. In that document, the CFIB urges the government not to ease off on its spending on business supports – and, indeed, to extend and increase them – until we’re well clear of the pandemic and Canadian businesses have been allowed to fully reopen.

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Otherwise, Mr. Kelly warned, the economy may suffer the serious ripple effects from businesses buckling under the heavy burdens taken on over the past 11 months.

“One of our top messages, and our first recommendation, is that this ain’t over,” he said.

“I would say that we have only seen a small portion of the economic damage that this is going to have on the economy as a whole,” he said. “The economic tail effects of COVID are likely to be significant, and for many small and medium-sized firms, dramatic.”

One of the most surprising statistics of the crisis – and one that some people routinely point to as evidence of the success of government support programs – is that despite the severe impact the pandemic has had on thousands of small businesses, the country has not been hit by a wave of bankruptcies. According to the Office of the Superintendent of Bankruptcy Canada, business insolvencies were down a remarkable 24 per cent in 2020 compared with 2019. Meanwhile, banking statistics indicate that after a spike in business loans at the start of the pandemic, the total business loans outstanding have been declining for months and are little changed from a year ago.

But beneath the surface, small businesses are grappling with a huge increase in non-loan debt – “unpaid bills,” Mr. Kelly said. Much of that is deferred rent payments that many businesses still owe to their landlords. CFIB data show the average small business has accumulated more than $100,000 in COVID-related additional debt.

He is worried this additional debt burden will seriously constrain businesses from making investments needed to restore economic growth. Worse still, many will decide that they have simply taken on too much financial water to continue, despite the coming reopening and the expected gradual return to normal.

“A lot of them are going to be looking at the books and saying, ‘There’s no pathway to profitability here. I’m done.’”

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With this in mind, one of the CFIB’s biggest asks is for a further expansion of the Canada Emergency Business Account (CEBA). Originally, the program provided interest-free loans of up to $40,000 to businesses, with one-quarter of the loan forgiven if paid back before the end of 2022. In December, the government increased the maximum loan to $60,000, with one-third forgivable. The CFIB recommends the government increase the loans again, to up to $80,000; increase the forgivable portion to 50 per cent; and extend the deadline for repayment.

“That would give them a fighting chance of survival,” he said.

That’s far from the only thing the CFIB is seeking through its prebudget recommendations. The group would like the Canada Emergency Wage Subsidy (CEWS) extended and redesigned as a hiring incentive for businesses. It wants reductions in regulatory red tape. And on the biggest question for this budget – how to spend Ottawa’s promised $70-billion to $100-billion postpandemic stimulus package – it wants the government to place incentives for business ahead of those for consumers.

As self-serving as that last may seem, the CFIB has a valid argument. There’s little question that a broad swath of small business has been in the direct line of fire from the pandemic; legions of mom-and-pop retailers and restaurateurs have been forced to close their doors, not once but now twice, to help contain the spread of the virus. While statistics show consumers who lost their jobs were remarkably well supported by the government’s income-replacement measures, small businesses have relied on borrowing and deferrals that have compounded their obligations.

It’s also pretty clear that any recovery won’t get far without a healthy small-business sector. Small and medium-sized enterprises account for a bit more than half of Canada’s gross domestic product and 85 per cent of employment. When businesses fail, it creates an uphill battle for an economy to recover the permanently lost jobs and output.

Much easier, Mr. Kelly argues, for Ottawa to help keep afloat the existing businesses that were healthy before the pandemic came along.

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“For a lot of businesses, their model works - and will work in the future - but it didn’t work during a once-in-a-hundred-years pandemic,” he said. “Making sure we support these businesses through, say, some debt relief, to get them back, contributing, paying taxes, creating jobs ... that is a good thing, too.”

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