CFIB pleads with governments to help pandemic-hit and inflation-pinched Canadian businesses
The Canadian Federation of Independent Business (CFIB) is warning that Wednesday's Bank of Canada rate increase, the fifth this year, will be particularly hard on small businesses, which are already feeling the pinch of inflation.
According to the CFIB's most recent report on inflation, seven in ten (70%) small business owners anticipate that interest rate increases will harm their operations.
In an effort to control inflation, the Bank of Canada increased its benchmark interest rate by 75 basis points, bringing the policy rate to 3.25%.
"While keeping inflation at reasonable levels is definitely an important policy goal, the rate increase comes at a time when 62% of small businesses are still saddled with pandemic debt, for an average of $158,000," said Simon Gaudreault, Chief Economist and Vice-President of Research at CFIB.
"Doing business in Canada is becoming too costly. Rising costs, compounded with interest rate hikes and difficulties finding staff, are putting business owners in a tough spot."
Based on the CFIB's August Business Barometer data, 32% of companies intend to raise their prices by 6% or more over the course of the following year, though this percentage appears to have peaked recently (previously 39% in June).
A survey of CFIB members conducted in June revealed nearly eight out of ten (79%) small business owners have increased their prices above average in the previous year to offset rising costs.
Another 81% of small business owners feel the federal government is unaware of the financial pressures they are under.
"This should sound the alarm for governments to take swift action and provide more cost relief," added CFIB President Dan Kelly. "Putting upcoming tax hikes on hold and fast-tracking promised reductions in credit card processing fees would be two early ways the federal government can help."
CFIB also urged governments to:
- Reduce the burden of provincial payroll taxes and freeze proposed federal tax increases, such as the CPP, EI, carbon, and alcohol tax increases that are due in 2022;
- Boost the forgivable portion for Canada Emergency Business Account (CEBA) loans to at least 50%;
- Delay the repayment deadline for CEBA loans to be eligible for loan forgiveness to December 2024;
- Raise the small business deduction from $500,000 to $600,000; and
- Reduce credit card processing fees for small businesses as soon as possible.
"As small firms are struggling to keep up with staggering increases on almost every line of their budget, governments must avoid imposing additional costs that would put the livelihood of small businesses at risk," Kelly said.
