Small businesses in Prairies taking on $180K in debt on average, new report says

Small businesses on the Prairies are taking on a significant amount of debt throughout the past six months of the COVID-19 pandemic, says a new nationwide report from the Canadian Federation of Independent Business (CFIB).

Across Canada, seven in 10 small business owners have taken on debt due to COVID-19, and the average debt per business is now reaching nearly $170,000, the report says. But the debt for small businesses on the Prairies the report lumps Manitoba and Saskatchewan together is over $180,000 on average.

CFIB estimates that, as of Feb. 1, the total debt taken on by small businesses across Canada is around $135 billion $8.3 billion on the Prairies.

"It's very concerning, but I don't think for a lot of small businesses this is surprising news by any stretch of the imagination," said Jonathan Alward, director of provincial affairs for the Manitoba branch of CFIB.

"[The average debt is] very alarming, especially when you consider that many of these businesses are still facing significant restrictions if not closed entirely and really, a lot of them don't have any path back to some semblance of normalcy."

Hair Co. Exchange, located in Winnipeg's Exchange District, is one of the small businesses in recovery after it was forced to shut down twice due to public health orders.

"Having to lay off all of your employees twice in one year is terrible," said owner Megan McGhie, whose grandfather started the business in the 1980s.

"The feeling of uncertainty, especially in the spring it was like, 'Are we going to make it?'"

McGhie is thankful to be open again, even if only at 25 per cent capacity and barely breaking even. But her biggest fear is having to close her business and lay off staff a third time, she said.

Alward has heard of some hair salons and barbers doing what they can to keep staff and follow the rules, such as extending their hours of operation, he said. But even still, the money made likely won't be enough to pay back the amount of debt the average business is taking on.

McGhie hopes she will be able to pay off her debts. But in the meantime, she'll need financial assistance from the Manitoba and federal governments to do so, until restrictions loosen further.

Only 18% of workers still working downtown

Meanwhile, businesses in Winnipeg's downtown are also trying to navigate the pandemic and less foot traffic.

Normally, there are over 70,000 workers in the downtown. But only 18 per cent of workers are currently still attending the area, according to research gathered by Downtown Business Improvement Zone.

"When the lockdowns have lifted a little bit, we've kept our hours quite limited because the streets are empty," said Aimee Peake, owner of Bison Books on Graham Avenue. "There's just no sense in paying staff and being here for long hours when there's nobody to cater to."

The book store has been able to stay afloat by increased online sales. Peake said historically, Bison Books has made about 70 per cent of its revenue over the counter, but shehad staff put more items online last summer to increase revenue from that stream, she said.

"Lucky for me, people are staying home, they're shopping online and they're reading more," she said, adding that she hopes to be able to rely more on in-store traffic when restrictions loosen.

So far, 40 businesses have shut down, according to the Downtown BIZ.

Many businesses in the downtown haven't reopened because it's too expensive, people can work from home, or they've closed up, said Peake.

The vacancies, including the former Hudson's Bay Co. building, need to be filled or there will be nothing to attract people to the downtown, she said.

Winnipeg's West End is facing similar problems to the downtown, according to Joseph Kornelsen, executive director of West End BIZ.

In the five years leading up to 2020, the West End had seen a net gain of eight businesses per year on average, saidKornelsen.

There were 60 businesses that opened in Winnipeg's West End in 2020 but 90 closed, equalling a net decrease of 30 businesses in the district, he said.

"During the pandemic, there's just been a lot more staying at home, staying safe, there's a lot more caution and that's the right thing to do," he said.

"But it does mean that you lose a lot of that street dynamism. You lose a lot of what makes that community in the West End so powerful and so much fun to come and visit."

Manitoba Premier Brian Pallister says the best thing people can do to help businesses right now is follow public health rules to bring COVID-19 numbers down.