Small businesses will be critical to our recovery
They make up a huge part of economy, Bruce Tannas says.
More than a year into the COVID-19 pandemic, it has become clear that this is more than a health crisis — it is also a crisis for small businesses. Before it is over, we will lose thousands of small businesses, especially in retail, hospitality and tourism. The Canadian Federation of Independent Business (CFIB) estimates one in six small businesses is at risk of closing.
These losses are extremely damaging for Canada's economy. Small businesses represent 97.9 per cent of all Canadian businesses, contributing almost half of the GDP generated by the private sector. Collectively, small businesses are the country's largest employer, putting more than 8.4 million Canadians to work. Every small business we lose means the economy loses jobs, productivity, entrepreneurial talent and investment.
Yet, governments of all political stripes have missed the boat so far on designing programs to help small business through this crisis. Programs that do exist come with complex application processes and rollout delays. For instance, the Canada Emergency Commercial Rent Assistance (CECRA) initially required landlords to apply on behalf of small businesses. Other programs, such as Canada Emergency Business Accounts (CEBA), have backlogs of 60,000 to 80,000 businesses that have been waiting for months to receive funding.
Governments must recognize the critical role small businesses will play in the economic recovery. After the 2008-09 recession, small businesses created 87.7 per cent of the new jobs in Canada. In some western provinces, including Alberta, that percentage was even higher. To help them recover and increase employment, governments need to rethink the delivery of their support packages. Rather than create new, complex programs on the fly like they did during the pandemic, they should piggyback on proven programs and tax credits.
Coming out of this crisis, many small businesses
Governments need to rethink the delivery of their support packages.
will be short on capital and in deeper debt — an average of $170,000, according to the CFIB. Access to additional credit will be an issue for existing businesses, and new businesses entering the market will also need to access capital. If credit tightens up, like it did after the 2009 recession, fewer business loans will be granted by banks and developmental lenders. This will result in less growth, as fewer new firms are formed, and fewer existing ones are able to access the capital they need to expand.
Federal and provincial governments have policy levers that can stimulate access to capital. The federal government could temporarily loosen requirements for bank loan guarantees through the Canada Small Business Financing Program. It can provide money for new loans through developmental lending agencies such as the Business Development Bank, Community Futures, Women's Entrepreneur Program and Futurpreneur. Federal and provincial governments could provide a temporary, acrossthe-board tax incentive on investing in a small business (for example, a 30 per cent tax rebate on new small business investment).
Governments should also provide incentives to hire and train employees. The first few months of a new hire is typically the least productive and highest risk for the employer. The federal government could ease the pressure by providing a payroll tax relief incentive for the first six months on new hires. Provincial governments could also offer training bursaries and incentives for training new and existing employees.
As we emerge from the first year of the pandemic — a year of restrictions, business closures and personal struggles — it is time for governments to rethink their approach. This is an opportunity to jump-start our economy through smart policies to help recapitalize small businesses and encourage them to hire. If we support them now, Canada's entrepreneurs will go to work for us — pumping millions of dollars into the economy and putting hundreds of thousands of Canadians to work.