Business insolvencies across Canada more than doubled in January compared to a year earlier, surpassing even pre-pandemic levels for the month.
According to the Office of the Superintendent of Bankruptcy, there were 759 business insolvencies recorded, a staggering 129.3% increase from January 2023 and well above the 308 cases in January 2020 before the COVID-19 crisis began.
Experts point to the mid-January deadline for repaying pandemic-era government loans as a major contributing factor to this stark rise in bankruptcies and proposals.
Simon Gaudreault, the Canadian Federation of Independent Business (CFIB) chief economist and vice president of research, told CTV News that for many struggling businesses, this looming cutoff date was “the straw that broke the camel’s back” amidst other challenges like inflation, labor shortages, higher interest rates, and waning consumer spending.
The loans in question are the Canada Emergency Business Account funds provided to nearly 900,000 companies and non-profits early in the pandemic. Up to $20,000 could be forgiven if the remaining balance was repaid by January 18th, 2024. Those who missed this deadline, and there were many according to Gaudreault, are facing having the outstanding amount convert to a three-year loan with 5% annual interest.
Gaudreault warns the official insolvency numbers likely understate the severity, as many smaller operations opt to quietly shut down rather than file. There’s some relief however, as the deadline to refinance has been extended until the end of March.Â
Sectors like accommodation/food services, retail, and construction saw particularly high spikes in insolvencies this January versus last year. Bankruptcies outpaced proposals in terms of year-over-year increases, though overall consumer insolvencies also rose by 23.5% compared to January 2023 levels.
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