Business insolvencies in New Brunswick increase sharply: New data

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Business insolvencies in New Brunswick have sharply increased and are poised to climb back to pre-pandemic levels for the first time.

That’s as consumer bankruptcies continue to inch up as well.

The surge in insolvencies in the new February data from the Office of the Superintendent of Bankruptcy is a sign companies are struggling with higher debt-carrying and other costs, according to the insolvency industry.

That’s as the business community has warned of the impact of pandemic business loans coming due.

New Brunswick has averaged only a handful of business insolvencies each quarter since the outset of the pandemic.

But February’s data saw eight insolvencies in a single month.

It’s the largest monthly increase since 2019.

It puts New Brunswick on pace to record its highest quarterly total since pandemic benefits rolled out to keep businesses afloat.

“Businesses have been struggling to cope with a myriad of financial challenges over the past year, including higher input costs, wage costs, and debt servicing costs, exacerbating the rocky footing many have been on ever since the pandemic,” said André Bolduc, chair of the Canadian Association of Insolvency and Restructuring Professionals.

Bolduc added that the debt accumulated by businesses during pandemic lockdowns is now weighing heavily on many Canadian businesses and, in some cases, making them no longer viable or in need of debt restructuring options.

The February data is also the latest look at the potential impact of pandemic business help ending.

A total of 12,091 New Brunswick businesses were approved for interest-free Canada Emergency Business Account federal government loans during the pandemic.

But a stipulation of the loan was that an unforgivable portion had to be paid back by the end of 2023.

If it was, the feds would forgive up to a third of the money it provided.

That said, if the unforgivable portion wasn’t paid back in time, a business is required to repay the entire loan back in full. That’s as it starts accruing interest at a five per cent rate.

The Canadian Federation of Independent Business says a survey of its members shows that 1,935 businesses in New Brunswick went to a private bank in order to get the money to pay off the government loan.

“Many of those businesses that had to borrow to repay their CEBA loans are facing high interest rates and will be challenged to meet their payment obligations,” said Canadian Federation of Independent Business president Dan Kelly. “We need to remember that while government got a lot of CEBA balances repaid, the debt for many businesses didn’t suddenly go away – it just shifted from a low interest government-backed loan to a higher interest bank loan.

“This should sound the alarm for policymakers, particularly given the business insolvencies are surging.”

Consumer insolvencies

Meanwhile, consumer insolvencies were up 20.4 per cent month over month in New Brunswick, according to the February data.

A total of 307 insolvencies were recorded, up from 255 in January.

That was also a 16.7 per cent increase over the 263 insolvencies recorded in New Brunswick in February 2023.

The number of insolvencies in the province has slowly inched up since dropping dramatically since the beginning of the pandemic, although they have yet to return to pre-COVID levels.

Consumer insolvencies in New Brunswick
2024
February – 307
January – 255
2023
Q4 – 815
Q3 – 926
Q2 – 967
Q1 – 813
2022
Q4 – 771
Q3 – 825
Q2 – 793
Q1 – 739
2021
Q4 – 660
Q3 – 688
Q2 – 835
Q1 – 802
2020
Q4 – 853
Q3 – 761
Q2 – 603
Q1 – 1,147
2019
Q4 – 1,202
Q3 – 1,255
Q2 – 1,308
Q1 – 1,086

Business insolvencies in New Brunswick
2024
February – 8
January – 3
2023
Q4 – 10
Q3 – 5
Q2 – 9
Q1 – 8
2022
Q4 – 7
Q3 – 8
Q2 – 4
Q1 – 7
2021
Q4 – 4
Q3 – 3
Q2 – 4
Q1 – 1
2020
Q4 – 11
Q3 – 5
Q2 – 5
Q1 – 1
2019
Q4 – 5
Q3 – 14
Q2 – 13
Q1 – 3