Home Month and Year December 2020 Small businesses banking for better days

Small businesses banking for better days

Experts credit financial relief measures, more personalized services behind uptick in optimism


The statistics paint a sobering picture of the hardships Canada’s entrepreneurial community has faced during the COVID-19 global pandemic.

Seventy-six per cent of small and medium-sized enterprises in Canada have reported a decline in revenues and profits.

Forty-six per cent have reduced their staff.

Thirty-nine per cent went further into debt.

The results from the Business Development Bank of Canada-led survey titled The Response: How Entrepreneurs Are Adapting to the Pandemic released this past October reveal the raw and often uncomfortable truth that our nation’s entrepreneurs have had to realize in this so-called “new normal.”

“Operating in an enviable economic environment before …, businesses and consumers alike have been impacted by the lockdown. The global health crisis has led to one of the largest economic crises in history,” writes BDC vice-president of research and chief economist Pierre Cleroux.

Yet, interestingly, the survey does not further paint a picture of foreboding doom. Instead, the polling of 1,000 Canadian SMEs paints one of optimism. Nearly nine of out 10 (87 per cent) of Canadian entrepreneurs are confident they will make it through the crisis – a sentiment that financial experts say reflects what they’re seeing closer to home here in Alberta landscape as well.

“We’ve seen some improvement and traction. Some (SMEs) have been able to pivot and consider different delivery (options) and a different business model in order to adapt,” says Wayne Kryzalka, managing director, small business with ATB Financial, pointing specifically to the further adoption of online food delivery services.

“We also found that because customers were staying here in Alberta, they started spending their discretionary income on everything from bicycles to hot tubs and kitchens. I’ve talked with more than one trade-based small business owner, and many have actually had to do more hiring. Some are saying they’ve had some of the best months ever.”

Kryzalka credits part of positivity within the SME community to a lineup of financial assistance programs that have been offered by the federal government through the pandemic and support by financial institutions such as ATB.

The Economic Development Canada’s Business Credit Availability Program (BCAP), for example, was announced in response to the pandemic, offering term loans for small and medium-sized businesses to cover payroll and operating costs. Repayable over five years, participants in the program can benefit from a six-month deferral on principal payments. Furthermore, EDC will guarantee 80 per cent of new operating lines of credit or new term loans.

“We know some clients have depleted their working capital – good, solid businesses that kept their employees on the payroll,” says Kryzalka. “We embraced the BCAP program because we know it’s there to provide capital for those businesses to grow and keep moving forward.”

The Canada Emergency Business Account (CEBA), meanwhile, was originally created to provide interest-free loans of up to $40,000 to small businesses and not-for-profits. Repaying the balance of the loan on or before Dec. 31, 2022 would result in loan forgiveness of 25 per cent (up to $10,000).

First unveiled this past April, that amount has since increased to $60,000, and has expanded its scope to also include eligible Canadian businesses that are currently operating through a personal bank account – not just a business account.

“The Government of Canada’s CEBA program was by far the most commonly used relief measure by our clients,” notes Kirk Muise, regional vice president, business financial services, Alberta & Territories for RBC. “At the end of August, RBC had processed more than $6.5 billion worth of CEBA loans representing nearly 163,000 loans for RBC business clients.”

TD Canada Trust similarly provided customers access to the programs such as BCAP and CEBA, reporting considerable uptake in Alberta, which is forecasted to be one of the hardest-hit provinces according to a recent forecast from TD Economics.

Shane O’Neill, senior manager, Prairie region for TD Small Business Banking, also notes the financial institution provided business owners with access to principal deferrals for up to six months at the onset of the pandemic that “helped stabilize cashflow and provide breathing room as customers grappled with the quickly changing landscape.”

For employers who have seen a drop in revenue due to COVID-19, the Canada Emergency Wage Subsidy Program (CEWS) provides a subsidy to cover part of their employees’ wages. It’s based on 80 per cent of an employer’s revenue loss for most businesses. Those business with losses more than 50 per cent qualify for a top-up of up to an additional 25 per cent.

“A lot of the financing that has been offered to small businesses have been done through these government programs because those were made very attractive … both in terms of the forgiveness elements (and) … zero interest,” says Jason Charlebois, senior vice-president, small business for Scotiabank.

Yet he adds that support from financial institutions such as Scotiabank have extended far beyond just a lending point of view. In fact, in Scotiabank’s New Path to Impact Report released in October, 63 per cent of small business owners say they do not foresee the need for additional financing to continue their operation, with smaller firms being less likely to require more financing.

Instead, programs such as the Scotiabank Women Initiative, for example, have become even more vital in also being able to offer access to timely financial advice, says Charlebois.

“Launched a few years ago, it’s focused on advancing women-led businesses across Canada by providing access to capital, mentorship and education. Obviously, that program was even more important for women entrepreneurs through the pandemic as it really helped provide them additional insight and advice.”

Kryzalka echoes those comments, noting ATB’s mandate during the pandemic has been to connect with its SME clients to provide access to one of the most valuable resources at this time: advice.

“We’re more than just lenders. When talking about sourcing capital, we’ll always be there,” he says. “But the one thing we really want to do to support small businesses is also providing advice. We’ve done a lot in identifying specialists within our business who really have a sound understanding of different industries, and having them connect with customers and bring out the best practices and ideas of how they can grow and how they can move their business forward.”

At TD, the financial institution recently launched TD Ready Advice, “a response to financial recovery from COVID-19,” says O’Neill. The program is meant to offer personalized advice and everyday banking capabilities available via online tools, as well as information on relief options.

“TD Ready Advice was created to help address the evolving financial needs of individual customers and small businesses,” adds O’Neill.

RBC, meanwhile, has expanded its “beyond banking solutions” to support the new realities of businesses. That includes a centralized service for everything from payment processing to invoicing and accounting, digital transformation and payroll.

“Our ultimate purpose is to help clients thrive and communities prosper. To do that, we, as a bank, need to do more than help our customers store and borrow money,” says Muise.

“We need to help them find ways to grow their business in a way that is resilient and sustainable, and that requires us to help them across the broader spectrum. How do we help them simplify the overwhelming process of starting a business? How do we help them recruit and support their employees? How can we help make it easier to manage their day-to-day operations with digital solutions so they can spend more time in front of their customers? Can we prepare them for longer term plans to enter new markets, or succession plan?

“If we can help our clients through these types of moments of truths, beyond just the transactions, that’s how we’ll help create stronger businesses, resilient economies and prosperous communities.”