Canada anticipates surge in bankruptcies amid economic downturn concerns

01 May, 2024

Canada anticipates surge in bankruptcies amid economic downturn concerns

Thousands of Canadian small businesses are teetering on the brink of bankruptcy as the government terminated pandemic-era financial aid last month amidst a slowing economy and rising interest rates. These small enterprises, employing fewer than 100 people each, are vital contributors to Canada's economic landscape, providing jobs for nearly two-thirds of the nation's 12 million private sector employees. Alarmingly, bankruptcies have surged by 38% in the first 11 months of 2023, raising concerns among lobby groups and economists about its detrimental impact on overall economic growth.

The recent deadline for repayment of interest-free loans, totaling C$60,000 ($44,676) per business, has exacerbated the situation. Despite the availability of this crucial support during the pandemic, a fifth of the 900,000 loan recipients have yet to repay their debts, according to Finance Minister Chrystia Freeland. The Canadian Federation of Independent Businesses (CFIB) estimates that a quarter of businesses missed the repayment deadline, further intensifying the financial strain.

Responding to inquiries, Finance Minister spokesperson Katherine Cuplinskas assured that the Department of Finance does not foresee adverse economic repercussions from loan repayments. Cuplinskas emphasized that businesses were well-informed about repayment timelines, enabling them to plan accordingly and mitigate potential financial shocks