Entrepreneurs: Seven Tips to Repay Your Pandemic Debts

Subsidies and other measures put in place by governments were essential to helping businesses weather the pandemic. However, many SMEs are still struggling with the debt they have incurred. In addition, their revenues are below their pre-pandemic levels. According to the Canadian Federation of Independent Business (CFIB), only 27% of business owners feel that their company has recovered. Entrepreneurs also need to start paying back the loans they received.

If you’re a business owner, with high inflation, rising interest rates, labour shortages and supply issues, you’re facing some tough challenges. How do you overcome them? What steps can you take to pay off debts incurred during the pandemic while weathering the uncertain economic climate? Here are our tips.

Take a step back so you can move forward

The first step is to prepare a sound financial plan. Take a health check of your business and assess its vulnerabilities. This will allow you to anticipate risks and support your company’s growth.

• Take the time to review your business plan. Don’t try to minimize the situation – face reality. The point of the exercise is to get real answers to what are sometimes difficult questions.
• Assess the risks in the current context: could your sales decrease because of reduced consumer purchasing power?
• Ask yourself: what are the risks to income? The profit margin? Your industry’s market characteristics? The reliability and costs of key supply chains?

Review your budget 

With the economy getting tougher, you need to review your financial projections for the next two to three years. The goal is to identify the key issues and possible solutions. Once you have identified operational, financial and market risks, you can implement an action and mitigation plan.

Avoid a cash shortage

With the end of financial assistance programs, many businesses are at risk of running out of cash and finding themselves in a precarious situation. Rather than focusing on profitability, focus on cash flow. Temporary losses can be absorbed, but not a lack of cash flow! Consider realigning capital structures to mitigate risk.

List your debts

List your current debts. Once you’ve completed your financial forecast, consider whether your business can handle its debts as they fall due. Also consider financing options or new repayment terms that would be appropriate for your business. Our turnaround specialists can help.

Prepare a repayment plan

Develop a repayment plan for debts and assistance received during COVID.

• Try to negotiate with lenders and see if they can give you a capital moratorium, reduce their interest rates or fees. Be prepared to present a business case and evidence that your business will grow in the coming months and that you will be able to repay the loans. Be aware that lenders generally prefer to reduce their interest rather than risk you not paying back the money you owe.
• Analyze your transactions closely and identify savings opportunities that will free up cash.
• Consider restructuring or selling your business, or parts of it.

Get information about post-pandemic assistance programs

Despite the end of the main pandemic-related assistance programs, a few programs are still available to SMEs (see our sidebar). Find out more!

Consult a professional

Don’t know where to start and the challenges seem overwhelming? A financial recovery professional can help you draw up a budget and evaluate the various options available to you. At Raymond Chabot, the first consultation is free!

If you are unable to repay your debts, one of our experts will guide you to find the best solution, whether it be to:

• Prepare a restructuring plan
• Make a notice of intention and proposal
• File for bankruptcy

Good luck!

Has your SME accrued considerable debt and you can’t see your way out? Book an appointment with one of our insolvency experts. It’s totally confidential and they can help you find a solution.