Optimism Returning, but Recovery Slow for Small Businesses

August 4, 2020 Updated: August 5, 2020

Optimism is beginning to return to owners of small businesses that survived the pandemic, according to a new survey. But things are far from rosy, and government programs still need revamping to adequately address ongoing challenges.

Terry Thorsteinson has owned Bregg Cleaners Tailors & Furriers in Regina since 1988. The business has survived recessions, he says, but nothing compares to the pandemic.

“It’s the worst,” Thorsteinson told The Epoch Times. “The government’s got all these loans and grants out and that’s the only thing that’s in fact helped us. I think we’ve applied for every handout that they’ve given. It’s sad.”

Canadian Federation of Independent Business (CFIB) spokesperson Jonathan Alward says government programs have been crucial to business survival, but many required tweaking. CFIB advocacy has led to a number of changes, but delays in implementation have left some businesses in deep trouble.

“There were a lot of legitimate businesses that didn’t qualify for that $40,000 [Canada Emergency Business Account interest-free] loan because of the way they were paying themselves or their staff—if it was contracted employees, or a family business paying themselves in dividends—and those have been largely addressed,” Alward says.

“One of the big outstanding problems is small businesses that continue to use a personal bank account instead of a corporate one. So now I believe they’re working on trying to find a fix to that, it’s just taking a long time. Those businesses are often very small and very much in need of that help for cash flow.”

The CFIB also wants changes to the Canadian Emergency Commercial Rent Assistance program. It requires landlords to drop their rent by 25 percent while federal and provincial governments pay 50 percent of the cost—leaving just 25 percent for the renter.

“That’s a big ask for the landlords,” Alward says. “We’ve been advocating to get that 50 percent grant from the federal and provincial program out to tenants directly to make sure that landlords aren’t required to participate.”

According to a CFIB survey of its members released July 30, 61.3 percent of businesses expect to do better in the next 12 months than in the previous 12—the highest reading on the Business Barometer Index since June 2019.

However, the CFIB said a “survivor effect” skewed the percentages in a positive direction. Many respondents with poor expectations in June did not respond in July, and that may well be due to business failures. Only 22 percent of businesses reported being in good shape, which is half of the usual.

Optimism is lowest in Quebec, at 39.6, and highest in Ontario, at 66.0—a rise of 12 percent. Scores have a wide range among sectors, with small and medium-sized businesses in agriculture and natural resources showing confidence in the low 40s, while wholesale, retail, and professional and enterprise services have confidence in the low 60s.

The CFIB found half of its members listed “insufficient domestic demand” as the greatest hindrance to sales.

In the dry-cleaning business, pandemic lockdowns changed the adage from “All dressed up and no place to go” to “Why dress up? There’s no place to go.”

That hasn’t changed much. Thorsteinson says he lost 95 percent of his business at the start of the pandemic. Even now it remains 85 percent below average, partly “because everybody’s on holidays and [wearing] tank tops and shorts.”

“We just limped by,” he says.

Alward says some small businesses were able to “pivot really well” during the pandemic, but most had disadvantages compared to larger businesses.

“Even in the retail sector you have big box chains that are more able to handle the more immediate challenges due to COVID better. It could be something as simple as enduring the extra costs. It could be PPE, all the signage, all the information you have to try to track down and find and get impermeable barriers for your cash.”

Amazon recently announced record sales revenue and profits in the second quarter of 2020, at US$88.9 billion and US$5.2 billion respectively. The company easily overcame the US$4 billion spent on pandemic-related health and safety efforts for workers during those months. Grocery sales tripled and electronics and clothing sales also rose dramatically.

Things were less happy at Bregg’s. Thorsteinson laid off 12 employees as shutdowns began, leaving only himself and his son on the payroll. August began with only half of that workforce back. He’s currently open only four hours on Tuesday and four on Thursday, unlike the usual eight hours Monday to Friday.

Thorsteinson put his business up for sale a year ago, but his retirement plans are on hold. “I don’t know anybody that’s looking to get into the service industry in these pandemic times,” he says.