Businesses that borrowed from a federal relief program during the pandemic tended to be small and heavily indebted, says a report by the Department of Industry.
Losses under the program are estimated to be in the billions.
“Around 40.8 percent of them had been in operation for no more than 10 years,” said the federal department, as first reported by Blacklock’s Reporter.
“Most of these (53.2 percent) were micro-sized, having no more than 4 employees, and 38 percent had between 5 and 19 employees.”
The findings were based on a survey conducted by Statistics Canada from April to August 2021 on 19,283 small and medium-sized enterprises (SMEs), using 2020 as the reference year.
“The target population for the survey was private-sector, for-profit SMEs with 1 to 499 employees and $30,000 or more in annual revenue in 2020,” the report said.
“For the main population, the response rate was calculated at 56 percent. Of these respondents, CEBA recipients represented 65 percent of all SMEs surveyed.”
Debt Financing
The SME Profile report said most borrowers were mostly from the hospitality industry.“The accommodation and food services sector had the highest CEBA application rate (81.6 percent), followed by the tourism sector (77.6 percent),” the report said. “The tourism group includes businesses that operate in transportation, recreation, and entertainment industries.”
Nearly 18 percent of businesses that received the CEBA loans in 2020, also requested other types of debt financing, such as second mortgages, lines of credit, term loans and credit cards, according to the report.
“I want to assure Canadian businesses we’ve had your back from day one,” Ng said. “We are going to continue to do that.”