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The CFIB estimates that the number of businesses whose viability is threatened by the pandemic could be as low as 71,000 or as high as 222,000 — between seven and 21 per cent of all businesses — depending on how the coming months unfold. The number of jobs put in jeopardy by the crisis ranges from 962,000 and 2.95 million, the association said, based on its projections.
So far, the concerns of small businesses do not seem to be translating directly into insolvency filings, according to a report this week from Statistics Canada.
In the third quarter of 2020, the number of insolvency filings under the Bankruptcy and Insolvency Act was unchanged from the previous quarter, at 474, and 13.8 per cent lower than the corresponding period a year earlier.
“This decline in insolvencies during the COVID-19 crisis could partially be explained by the government programs to support businesses and help them stay afloat during this difficult period,” the StatsCan report said, with loans and rent and wage subsidies being among the forms of aid that have been offered.
The figures suggest “corporations are waiting to see if more government aid is coming, before filing for insolvency,” the report said, adding that low borrowing costs for businesses could also go some way towards explaining the drop in insolvency filings.
Insolvency filings by large companies under the Corporations’ Creditors Arrangement Act were more prevalent. These were led by corporations in the manufacturing and oil and gas extraction and support sectors.
According to StatsCan, such filings more than doubled to 21 filings in the second quarter, an historic high. However, there were only nine such filings in the third quarter.
The CFIB’s Gaudreault noted that “only a fraction of permanent business closures” show up as insolvency filings, and that the data comes with a significant lag.
“What we have mainly tried to do with our research is to show the risks ahead for struggling Canadian businesses,” he said.
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