Borrowing costs biggest challenge for businesses

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More than half of small businesses are struggling with borrowing costs, causing the biggest difficulties in running their operations, according to the Canadian Federation of Independent Business (CFIB) Business Barometer.

The historical average has been about 22 per cent of businesses saying so. Now at 51 per cent, it’s at its highest level since the CFIB began tracking it in 2009. A record share of businesses (36 per cent) also noted a shortage of working capital as one of their biggest limitations on growth.

“The Bank of Canada tapped the brakes more firmly with its rate hikes in June and July. Although it kept the rate unchanged at 5% this September, a large and growing number of businesses now deal with significant financing challenges, on top of the already very difficult business environment” said Andreea Bourgeois, director of economics at CFIB. “Small businesses reinvest 66 cents of every dollar earned back in their communities. With holiday season fast approaching, this is another reminder to support local businesses whenever possible.”

The central bank held its key interest rate steady at 5 per cent, it announced on Oct. 25. It observed that there are clearer signs of the economy cooling and inflation easing. That said, it warned future rake hikes are possible.

The Bank of Canada noted its concern that price growth is easing more slowly than it’d like. The inflation rate has been volatile in recent months as well.

While there isn’t a recession, there has been an economic pullback, forecasters suggested as they predicted no rate hike. New economic projections released by the central bank suggested economic growth will continue to be weak well into 2024 before picking back up later in the year.

While it expects inflation to remain high in the short term, the central bank expects numbers to return to its target of 2 per cent in 2025.