Scotiabank study shows majority doing the same or better than two years ago, though inflation and interest rates cause concern
Most Canadian small businesses are currently doing as well or better than they were two years ago after surviving the worst of the pandemic, according to Scotiabank's third annual Path to Impact Report.
Three fourths (75%) of Canadian small businesses polled are reportedly doing the same or better than they were two years ago. Compared to last year's study, this represents an increase of 54%.
Business owners polled by the Big Six bank said that they are more prepared to weather another pandemic wave or a recession, with two thirds being upbeat about the state of their company's future.
Read more: Canada's SMBs are confident of growth despite recession fears
Nevertheless, many small firms are concerned about inflation, rising interest rates, supply chain challenges, and a labour shortage.
"As we see reinvigorated consumer demand, businesses are reporting positive sales and revenue numbers, and less cash flow concerns. While it's encouraging to see more optimism, the road ahead will pose new challenges," said Jason Charlebois, senior vice president, Small Business, Scotiabank.
A third of small businesses (34%) said they’re feeling the impact of inflation; among that group, 37% said they’re experiencing a significant impact, and 4% say it’s a critical impact. Meanwhile, rising borrowing costs are impacting 24% of small firms, with 42% in that group reporting a significant impact and 4% reporting a critical impact.
For one quarter (25%) of small businesses, labour shortages and/or problems obtaining materials are posing challenges.
Two thirds (65%) of small business owners expect they will need more financing to weather the challenges – firms with revenues above $500,000 anticipate needing more than those whose revenues fall below that threshold – while nearly a third identified cost-cutting as their top priority over the next three months.
Read more: Most small businesses agree governments should do more to fight inflation
Because of this, more small firms are seeking advice from outside parties. Over the previous two years, 90% of business owners polled said they have sought counsel or support from someone, and 49% of those who turned to a qualified financial advisor reported that their company is performing better as a result.
"Small businesses are facing serious economic headwinds from inflation, rising interest rates, and labour market shortages,” Charlebois said. “Small business owners should continue to be proactive in seeking qualified advice, leveraging all available financing options and tools."
