Pierre Cleroux Chief Economist at Business Development Bank of Canada (BDC) Discusses COVID-19’s Impact on Small Businesses Across Canada

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[00:00] SPEAKER_00: It's the Canada's podcast network.
[00:04] SPEAKER_01: Hello and welcome to Canada's podcast network.
[00:07] SPEAKER_01: I'm your host Mario Tonoguzzi joining me today is Pierre Clareau,
[00:11] SPEAKER_01: who is chief economist with BDC, the business development bank of Canada.
[00:16] SPEAKER_01: Thanks for joining us today, Pierre.
[00:18] SPEAKER_01: My pleasure.
[00:19] SPEAKER_01: Hey, we're going to talk about COVID-19, the coronavirus,
[00:22] SPEAKER_01: and its impact on small businesses.
[00:24] SPEAKER_01: Let me just start, Pierre, by asking you like a general question is,
[00:30] SPEAKER_01: what is the feel that you get in the sense that you get out there about
[00:34] SPEAKER_01: why the impact this is having on small businesses throughout the country?
[00:39] SPEAKER_00: Well, the impact is very severe.
[00:42] SPEAKER_00: We keep track of the impact by survey about more than a thousand SMEs
[00:48] SPEAKER_00: so every second week.
[00:50] SPEAKER_00: And our latest result, which was produced just last week,
[00:56] SPEAKER_00: shows that 90% of SMEs across the country are negatively impacted.
[01:02] SPEAKER_00: So to give you a perspective, the first week of the lockdown,
[01:06] SPEAKER_00: this number was 40%.
[01:08] SPEAKER_00: The second time we surveyed people was 70% to any 3%,
[01:12] SPEAKER_00: now we are at 90%.
[01:14] SPEAKER_00: So obviously, the impact is really hard on small and mid-sized friendly Canada.
[01:20] SPEAKER_01: So when you're looking at that total impact,
[01:24] SPEAKER_01: what is the, I guess, the major fear here,
[01:27] SPEAKER_01: like how many of these businesses can actually survive,
[01:31] SPEAKER_01: depending how long this continues on?
[01:33] SPEAKER_00: The biggest problem for SMEs, what they are telling them out.
[01:37] SPEAKER_00: So do you remember at the beginning of a crisis,
[01:40] SPEAKER_00: we thought that the lack of supply coming from outside,
[01:43] SPEAKER_00: for example, from China was going to be a problem.
[01:47] SPEAKER_00: But actually, right now, the biggest issue is the lack of demand
[01:50] SPEAKER_00: because many areas of Canada is basically in lockdown
[01:55] SPEAKER_00: and will be for the next few weeks.
[01:58] SPEAKER_00: So basically, a lot of companies are either shut down
[02:01] SPEAKER_00: or the demand is very low.
[02:04] SPEAKER_00: So that's the biggest issue.
[02:06] SPEAKER_00: To the question are people going to survive?
[02:09] SPEAKER_00: Well, it's going to depend really how long the lockdown is going to happen.
[02:14] SPEAKER_00: We hope that, for example, at the beginning of May,
[02:17] SPEAKER_00: the lockdown in Canada was mostly done
[02:20] SPEAKER_00: and people were able to restart.
[02:22] SPEAKER_00: The economy is going to restart and their business is going to start to restart.
[02:26] SPEAKER_00: So hopefully, with all the programs that the federal government did
[02:30] SPEAKER_00: and also some provinces,
[02:32] SPEAKER_00: hopefully, business will be able to wait until May
[02:36] SPEAKER_00: when the economy is going to restart.
[02:39] SPEAKER_01: Is cash flow the most important thing for these businesses right now?
[02:43] SPEAKER_00: Definitely.
[02:44] SPEAKER_00: When you're locked down, your revenue stopped,
[02:47] SPEAKER_00: but your cost is still running.
[02:50] SPEAKER_00: A lot of people will have to lay off their people
[02:53] SPEAKER_00: but they still have a cost related to their rent or their mortgages
[02:57] SPEAKER_00: or pay their equipment and everything.
[03:00] SPEAKER_00: So this is really the big problem right now.
[03:04] SPEAKER_01: When you look at the companies that are going to survive this,
[03:08] SPEAKER_01: what is the key for them to survive?
[03:12] SPEAKER_00: To the business who are selling online,
[03:16] SPEAKER_00: they are doing better because they are able to continue
[03:19] SPEAKER_00: to have some revenue and they're going to sell.
[03:23] SPEAKER_00: You know, the interesting thing,
[03:24] SPEAKER_00: we have been saying that for three years.
[03:26] SPEAKER_00: We did a lot of study showing that people who are,
[03:29] SPEAKER_00: they were able to sell online either
[03:31] SPEAKER_00: on their own website or through another platform.
[03:36] SPEAKER_00: Like, for example, Amazon, that's quite popular.
[03:39] SPEAKER_00: Even like before the crisis two or three years ago
[03:43] SPEAKER_00: or last year, they were doing better than other companies.
[03:47] SPEAKER_00: But this crisis is showing that this is really true.
[03:50] SPEAKER_00: So companies who are already selling online,
[03:53] SPEAKER_00: they are able to continue to operate in many cases.
[03:57] SPEAKER_00: So this is going to make a huge difference.
[03:59] SPEAKER_00: And I believe that after all this is done,
[04:04] SPEAKER_00: the online business is going to accelerate more than what we saw
[04:08] SPEAKER_00: before the crisis.
[04:10] SPEAKER_01: That's going to be one of the major changes you see for businesses
[04:13] SPEAKER_01: going forward.
[04:14] SPEAKER_00: I think so.
[04:15] SPEAKER_00: I think the online business is going to be a major change
[04:19] SPEAKER_00: compared to what we saw before was already there.
[04:23] SPEAKER_00: Online business was increasing by 15% every year.
[04:26] SPEAKER_00: But I think Canadians are taking the habit
[04:29] SPEAKER_00: even more now.
[04:31] SPEAKER_00: To, you know, for example, a client with still needs
[04:34] SPEAKER_00: and he has a grocery store and he said he received
[04:37] SPEAKER_00: much more order now.
[04:40] SPEAKER_00: But what's surprising is much more for BB boomers.
[04:44] SPEAKER_00: They're not typically the one will be using the online business
[04:48] SPEAKER_00: in the past.
[04:50] SPEAKER_00: So I think we're going to have much more Canadian
[04:52] SPEAKER_00: are going to get this habit.
[04:54] SPEAKER_00: So it's going to this trend.
[04:55] SPEAKER_00: I think it's going to accelerate.
[04:57] SPEAKER_01: Okay.
[04:58] SPEAKER_01: Pierre, tell me what BDC is doing to help small business owners
[05:02] SPEAKER_01: in Canada right now.
[05:04] SPEAKER_00: Well, we're doing a number of things.
[05:06] SPEAKER_00: First of all, we are able to our clients.
[05:09] SPEAKER_00: We're able to postpone their capital for up to six months.
[05:15] SPEAKER_00: So we're able to, so for example, if you have a loan with BDC
[05:19] SPEAKER_00: and you need to postpone your payment for up to six months,
[05:23] SPEAKER_00: we are able to do that very, very quickly.
[05:28] SPEAKER_00: Also, we are part of the fellow government program on loans.
[05:33] SPEAKER_00: So we are able with a definition institution to work to a loan
[05:37] SPEAKER_00: to six point twenty five million dollars.
[05:41] SPEAKER_00: And EDC is able to do the same.
[05:43] SPEAKER_00: So the total amount could be twelve point five million dollars.
[05:48] SPEAKER_00: But in order to do that, you have to contact your
[05:51] SPEAKER_00: definition institution first because they are the one who are
[05:53] SPEAKER_00: going to evaluate your needs and they're going to work with BDC
[05:58] SPEAKER_00: and EDC to provide the company the best loan possible.
[06:03] SPEAKER_00: So that's basically the involvement of BDC.
[06:06] SPEAKER_00: We also do a lot of loan online.
[06:11] SPEAKER_00: So there's a number of ways that BDC is trying to help
[06:15] SPEAKER_00: businesses to go through this difficult period of time.
[06:19] SPEAKER_01: Okay, one last question for you, Pierre.
[06:22] SPEAKER_01: What would you say would be your major tips or advice for small
[06:27] SPEAKER_01: businesses to get through this crisis right now?
[06:30] SPEAKER_00: I think what is important to remember that the recovery is going
[06:33] SPEAKER_00: to come.
[06:34] SPEAKER_00: I know it's hard to believe right now because we are in a such
[06:38] SPEAKER_00: a lockdown across a country that really it's really depressing.
[06:43] SPEAKER_00: But the recovery is going to come when we look at the we look
[06:47] SPEAKER_00: at other countries around the world especially in to China
[06:50] SPEAKER_00: because China was the first country having the virus.
[06:54] SPEAKER_00: It's also the first country to recovery.
[06:57] SPEAKER_00: Although China is different from Canada, we can learn from
[07:00] SPEAKER_00: that experience and what we are learning is when the lockdown
[07:03] SPEAKER_00: is over.
[07:04] SPEAKER_00: The economy is restarting quite quickly, especially in some sectors
[07:09] SPEAKER_00: like construction and manufacturing.
[07:11] SPEAKER_00: It takes a bit more time on the consumer sector.
[07:15] SPEAKER_00: But what we learn is the recovery is going to be quite quick
[07:19] SPEAKER_00: compared to other recession in the past.
[07:22] SPEAKER_00: So what is important to remember right now do everything
[07:25] SPEAKER_00: you can to protect your business, to secure your business
[07:28] SPEAKER_00: for the next few months, but be ready for the recovery.
[07:31] SPEAKER_00: It's going to happen.
[07:33] SPEAKER_00: Okay, then thanks a lot for joining us today, Pierre.
[07:36] SPEAKER_01: Look, Leisure, thank you.
[07:37] SPEAKER_01: That was Pierre Clareau, Chief Economist of BDC on Canada's
[07:42] SPEAKER_01: podcast network.
[07:43] SPEAKER_01: I'm your host Mario Tonoguzi.