Rate Increase Will Be Hard For Small Business

The most recent Bank of Canada rate increase, the fifth this year, will be a hard hit to small businesses that are already feeling the squeeze of inflation, says the Canadian Federation of Independent Business (CFIB). The Bank of Canada raised its benchmark interest rate this week by 75 basis points in an effort to curb inflation, bringing the policy rate to 3.25 per cent. CFIB says 70 per cent of small business owners expect interest rate hikes to have a negative impact on their operations. "While keeping inflation at reasonable levels is definitely an important policy goal, the rate increase comes at a time when 62 per cent of small businesses are still saddled with pandemic debt, for an average of $158,000," says Simon Gaudreault, chief economist and vice-president of research at CFIB. "Doing business in Canada is becoming too costly. Rising costs, compounded with interest rate hikes and difficulties finding staff, are putting business owners in a tough spot." CFIB's ‘August Business Barometer’ data says 32 per cent plan to raise their prices by six per cent or more in the next 12 months. However, this is down from 39 per cent in June. Nearly eight in 10 small business owners raised their prices more than usual in the past year to compensate for rising costs. Moreover, 81 per cent of small businesses believe the federal government does not understand the cost pressures they face.