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BUSINESS DEBT CRISIS OPTIONS COMPLETELY EXPLAINED BY A TORONTO LICENSED INSOLVENCY TRUSTEE

The Greater Toronto Area is facing its worst business debt crisis in decades. As a licensed insolvency trustee who has helped many GTA businesses navigate financial challenges, I’m seeing alarming trends that every business owner needs to understand.

The GTA Business Landscape: Canada’s Economic Powerhouse Under Pressure

Toronto is Canada’s business and financial capital. It is the second-largest financial centre in North America. Our diverse economy spans technology, manufacturing, retail, hospitality, and professional services. This diversity usually protects us during downturns, but today’s debt crisis and the need for GTA business debt relief are hitting all sectors.

The IBISWorld Ontario Economic Overview report shows the numbers that tell the story:

  • Commercial banking generates $117.9 billion in revenue
  • Retail trade employs 884,368 people in Ontario
  • Professional services support 562,343 workers
  • Manufacturing provides 560,630 jobs

Yet despite this economic strength, a June 2025 IPSOS poll found that only 26% of Toronto residents say our economy is in good shape. Most concerning? 41% believe we’re heading in the wrong direction – away from economic prosperity.

How COVID-19 Started Toronto’s Debt Crisis

The Initial Shock That Changed Everything

When COVID-19 hit in March 2020, Toronto’s downtown core emptied overnight. Restaurants, hotels, retail stores, and service businesses saw customers disappear. Some sectors lost 25% of their business immediately.

The Canadian government responded with the Canada Emergency Business Account (CEBA) program. The Government of Canada has reported that over 898,000 Canadian businesses received $49 billion in emergency loans. At the time, this felt like a lifeline.

But here’s what many business owners didn’t realize: CEBA wasn’t free money. It was a loan with a delayed payment schedule.

Permanent Changes That Hurt Businesses

COVID-19 didn’t just create a temporary problem. It permanently changed how people work and shop:

  • Remote work became permanent – Downtown Toronto office vacancy hit 18.2%
  • Online shopping exploded – Many customers never returned to physical stores
  • Business travel disappeared – Hotels and restaurants lost corporate clients
  • Consumer habits shifted – People became more price-conscious and cautious

Source: The Toronto Metropolitan University June 5, 2025 media release titled “New Economic Report Underscores Urgency to Revitalize Downtown Toronto”.

These weren’t temporary changes. They represent a “new normal” that many businesses still struggle to adapt to.

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debt crisis

Current State of the Debt Crisis: The Numbers Are Alarming

The CEBA Cliff Hit Hard

Business failures in Canada jumped by 87.2% in early 2024 – the biggest increase in 37 years. This debt crisis spike happened right after the CEBA loan forgiveness deadlines passed.

Source: The Canadian Association of Insolvency and Restructuring Professionals (CAIRP), July 5, 2024, media release titled: “Q1 2024 Canadian Insolvency Statistics”.

Here in Toronto, CAIRP stated that GTA business insolvency rates climbed from 0.4 per 1,000 businesses in 2021 to 0.7 in 2023. While that sounds small, it represents hundreds of local businesses closing their doors because of the debt crisis.

An infographic showing the Toronto Ontario industries hit hardest by Toronto Insolvency Rates 2021-2023

Source: Canadian Association of Insolvency and Restructuring Professionals (CAIRP) July 5, 2024 media release titled: “Q1 2024 Canadian Insolvency Statistics”

Most Failures Are Permanent Closures

Unlike consumer debt problems, which often involve payment plans, business failures are mostly bankruptcies. This means permanent closure, not restructuring. Business owners are giving up entirely rather than trying to reorganize.

Rising Delinquencies: A Warning Sign of Worse to Come

The debt crisis isn’t just about businesses that have already failed. Over 309,000 Canadian businesses missed at least one credit payment in early 2025 – that’s 11.3% of all businesses with credit.

For GTA businesses, these are some missed payment rates:

  • Restaurants and hospitality: 16.9%
  • Retail stores: 13.2%
  • Overall business loans 60+ days overdue: 3.4%

Ontario leads the country in business payment debt crisis problems, with an 18.8% increase year-over-year.

Why Businesses Can’t Pay Their Bills

Customer spending is down. The average consumer cut credit card spending by $107 per month in early 2025. When your customers have less money, your revenue drops.

Operating costs keep rising. Food costs are up 5.8%, rent up 6.0%, and wages up 4.8%. Profit margins are getting squeezed from both sides.

Household debt is crushing consumers. Canadian consumer debt hit $2.55 trillion. Ontario homeowners saw mortgage payments jump by over $680 monthly after renewal. When families are financially stressed, they stop spending on non-essentials.

CEBA loans are now due. As of January 19, 2024, 161,000 businesses still owed $7.8 billion in CEBA loans. Interest started charging at 5% annually, turning “emergency help” into another monthly payment. Outstanding CEBA loans are due for full repayment on or before December 31, 2026.

New Regulatory Pressures Adding to Business Costs

While the government talks about cutting red tape, Toronto businesses face new municipal-level regulations that add costs:

New Rules Taking Effect

  • Toronto nightclub licensing changes (January 2025)
  • Digital platform worker protections (July 2025) – affects delivery and ride-share businesses
  • New building codes (January 2025) – impacts construction companies
  • “Renoviction” bylaws (July 2025) – add costs for landlords
  • Civil litigation procedure changes – increases legal costs

Each regulation may be well-intentioned, but they all add compliance costs when businesses can least afford them.

The Pandemic’s Effects Still Linger

Consumer Behaviour Changed Forever

In our practice, we see businesses still struggling with permanent shifts in customer behaviour:

Customers shop differently now:

  • More online shopping, less in-store browsing
  • Greater focus on local businesses
  • More price-conscious decision-making
  • Delayed major purchases (cars, appliances, travel)
  • Higher expectations for health and safety

Businesses must operate differently:

  • Heavy investment in technology and e-commerce
  • Flexible work arrangements affect office space needs
  • Enhanced health and safety measures
  • More resilient supply chains
  • Higher service level expectations

The Technology Investment Burden

Every business now needs robust online capabilities. This means ongoing costs for:

  • E-commerce platforms
  • Cloud-based systems
  • Process automation
  • Cybersecurity
  • Staff training

For businesses already struggling with a debt crisis, these necessary investments create additional financial pressure.

Business debt crisis consultation in Toronto office with CN Tower skyline background
debt crisis

Economic Pressures: The Double Hit of Recession and Inflation

Inflation Squeezes Profit Margins

Even though headline inflation dropped to 3.8% nationally, key business costs remained high:

  • Food prices: up 5.8%
  • Shelter costs: up 6.0%
  • Overall consumer prices: up 11.4% over two years

Toronto businesses face a cruel math problem: costs rise faster than what customers can pay.

Recession Fears Become Reality

Ontario’s economic growth fell to just 0.8% in 2025, with unemployment rising for eight straight quarters to 7.5%. When unemployment rises, consumer confidence falls, and spending drops further.

The vicious cycle: Higher costs → Higher prices → Fewer customers → Lower revenue → Unable to pay debts

Tightening Credit Markets Make Everything Worse

High interest rates created a credit crunch that hit businesses hard:

Borrowing became expensive: 63% of businesses say high interest rates prevent expansion or investment.

Credit demand dropped: 6% fewer businesses applied for new credit in early 2025. New credit card applications fell 10.3%.

Consumer credit tightened: When customers can’t get credit, they spend even less at your business.

Mortgage renewal shock: Ontario homeowners face mortgage renewal shocks. Payments increase by an average of $680 monthly. This leaves less money for extra spending.

Managing Financial Crises: What Works?

Cash Flow Management Must Be Daily

In this debt crisis, managing cash flow isn’t a monthly task – it’s a daily survival skill.

Track money every day:

  • Check bank balances each morning
  • Use a 13-week cash flow forecasting financial model
  • Know exactly what’s due when
  • Plan every payment carefully

Speed up money coming in:

  • Accept all payment methods (cards, e-transfer, mobile)
  • Offer discounts for quick payment (2% for 10 days)
  • Call overdue customers personally
  • Send invoices immediately

Slow down money going out:

  • Pay critical suppliers first (those who could shut you down)
  • Use electronic payments to control timing
  • Negotiate payment plans before you’re in trouble
  • Consider temporary hour reductions before layoffs

Strategic Payment Prioritization

When cash is tight, not all debts are equal. Here’s the priority order I recommend:

  1. Payroll and source deductions (CRA will shut you down)
  2. Critical suppliers (those who keep you operating)
  3. Rent and utilities (you need a place to operate)
  4. Secured loans (they can seize collateral)
  5. Unsecured loans and credit cards (last priority)

Strategies for Addressing the Debt Crisis

Debt Restructuring Options That Work

Informal arrangements: Sometimes you can negotiate with creditors before formal proceedings. Recent success: a dining establishment reduced its monthly payments from $12,000 to $4,000.

Consumer proposals: If you’ve personally guaranteed business debts, this can reduce personal liability by up to 80%.

Business proposals: For companies, a formal proposal can reduce payments to all creditors simultaneously, thereby eliminating a debt crisis.

Strategic bankruptcy: Sometimes, closing one business cleanly allows you to start fresh without old debts following you.

Asset Management Approaches

Smart asset management can generate cash and reduce the debt crisis:

Sale-leaseback arrangements: Sell equipment or property, then lease it back. This generates immediate cash while keeping operational assets.

Asset liquidation: Sell non-essential assets. That unused equipment or excess inventory can become debt payments.

Intellectual property monetization: You can make money from intellectual property by licensing your processes, customer lists, or trademarks for ongoing income.

Real estate optimization: Consider subleasing unused space, downsizing, or moving to cut overhead costs.

Business debt crisis consultation in Toronto office with CN Tower skyline background
debt crisis

Closing the Funding Gap: Where to Find Money

Government Programs Still Available

Canada Small Business Financing Program:

  • Up to $1 million in loans
  • Government backs 85% of lender risk
  • Better rates than regular business loans
  • Available through most banks and credit unions

Business Development Bank of Canada (BDC):

  • Patient capital for struggling businesses
  • Industry-specific expertise
  • Flexible repayment terms
  • Will work with businesses other lenders won’t touch

Ontario-specific programs:

  • Advanced Manufacturing and Innovation Competitiveness (AMIC)
  • Canadian Digital Adoption Program (CDAP)
  • Various regional development funds

Alternative Financing When Banks Say No

Invoice factoring: Sell your accounts receivable for immediate cash (typically 80-90% of invoice value).

Merchant cash advances: Get cash now based on future credit card sales (expensive but fast).

Peer-to-peer lending: Online platforms connect you directly with individual investors.

Revenue-based financing: Repayments are based on monthly revenue rather than fixed payments.

Crowdfunding: Crowdfunding works well for businesses that serve customers directly and have strong stories.

Learning from Denmark: How Copenhagen Handles Debt Better Than North America

Denmark, especially Copenhagen, does things differently – and better in many ways.

As a licensed insolvency trustee, I’ve seen what works and what doesn’t. Denmark’s approach offers real lessons for Canadian businesses struggling with a debt crisis.

How Denmark’s Government Manages Money (And What Businesses Can Learn)

Denmark keeps things simple and clear when managing government debt. Here’s what they do right:

They Have Clear Fiscal Oversight Rules In Denmark everyone knows who’s responsible for what. The Finance Minister makes the big decisions. The Danish National Bank handles the day-to-day money management. No confusion, no finger-pointing.

Everything Is Out in the Open Danish debt management is transparent. They publish their plans, explain their decisions, and stick to clear goals. This builds trust with lenders and keeps borrowing costs low.

They Plan for Problems The Danish National Bank actively watches for risks. They don’t just hope things work out – they prepare for trouble before it happens.

They Focus on Long-Term Costs Instead of looking for quick fixes, Denmark focuses on keeping borrowing costs low over many years. They accept some risk to achieve better long-term results.

How Denmark Helps People With Too Much Debt

Denmark’s consumer debt relief system is much simpler than ours:

One Program, Not Many Unlike Canada, where people might get confused by multiple options, Denmark has one clear debt relief program. Everyone knows how it works.

Pay What You Can, Then You’re Done People pay back what they can afford for five years. After that, the remaining debt disappears. It’s that simple.

This approach reduces stress and gives people a clear path to financial freedom.

What Danish Business Debt Rules Teach Us

Denmark has clear rules for dealing with a business debt crisis:

Clear Collection Process When businesses can’t pay, there’s a step-by-step process everyone understands. No surprises, no unclear rules.

Fair Bankruptcy System If a business truly can’t continue, bankruptcy is available. But there are clear requirements – you can’t just walk away from debts without a good reason.

Some Debts Come First When paying back creditors, certain debts get priority – like employee wages and government fines. This protects workers and ensures fair treatment.

Four Key Lessons for Toronto Businesses

After studying Denmark’s system, here are the most important lessons for GTA businesses:

1. Have Clear Financial Rules Just like Denmark’s government, your business needs clear financial procedures. Know who makes spending decisions. Set borrowing limits. Create rules for paying suppliers.

Whenever we do a financial restructuring under either a BIA Proposal or a CCAA Plan of Arrangement, businesses with clear financial procedures survive crises better than those making it up as they go.

2. Manage Risk Before Problems Start Denmark doesn’t wait for a debt crisis – they plan. Your business should do the same.

Ask yourself:

  • What could go wrong with my cash flow?
  • Which customers might stop paying?
  • What happens if my biggest supplier demands cash only?
  • How would a recession affect my business?

3. Be Open About Your Financial Situation Denmark’s transparency builds trust and keeps borrowing costs low. The same works for businesses.

Be honest with:

  • Your bank about cash flow challenges
  • Suppliers about payment timing
  • Key customers about any service issues
  • Your accountant about all financial concerns

I’ve seen businesses get better deals from creditors simply by being upfront about their situation.

4. Think Long-Term Economic Resilience, Not Just Survival Denmark focuses on long-term borrowing costs, not just immediate needs. Businesses should think the same way.

Don’t just ask: “How do I pay this month’s bills?” Instead, ask: “How do I build a business that can handle future challenges?”

This might mean:

  • Accepting higher costs now for more reliable suppliers
  • Building cash reserves instead of maximizing current profits
  • Investing in systems that reduce future risks
  • Developing multiple revenue streams

Why These Lessons Matter for Canadian Businesses

Denmark’s approach works because it’s predictable and fair. Everyone knows the rules. There are clear consequences for breaking them. People can plan.

Canadian businesses facing debt crisis often struggle because:

  • Rules seem to change constantly
  • Different creditors want different things
  • No one explains the options clearly
  • Business owners feel lost and alone

Denmark’s system shows there’s a better way.

Applying Danish Lessons in Your Business

You can start using Danish-inspired approaches today:

Create Financial Transparency

  • Prepare monthly financial reports (even simple ones)
  • Share appropriate information with key stakeholders
  • Document your financial decision-making process
  • Keep clear records of all business debts and payments

Develop Risk Management Habits

  • Review your biggest financial risks monthly
  • Create backup plans for your most important suppliers
  • Maintain relationships with multiple lenders
  • Build cash reserves when times are good

Establish Clear Procedures

  • Write down who can authorize spending
  • Create a priority list for paying bills during tight times
  • Develop criteria for extending credit to customers
  • Set clear policies for managing business debt

When Danish-Style Approaches Aren’t Enough

Sometimes, despite good financial management, businesses still face an overwhelming debt crisis. That’s where professional help becomes necessary.

As a licensed insolvency trustee, I help businesses when:

  • Clear procedures aren’t enough to solve cash flow problems
  • Risk management didn’t prevent a major crisis
  • Transparency reveals more problems than solutions
  • Long-term thinking shows the business isn’t viable

Even then, Danish lessons help. Transparent businesses, planned, and managed risks professionally, have more options when a crisis hits.

The Bottom Line for Toronto Businesses

Denmark proves that simple, clear, fair approaches to debt work well. Their success comes from:

  • Clear rules everyone understands
  • Transparency that builds trust
  • Risk management that prevents problems
  • Long-term thinking over quick fixes

You can apply these principles whether your business is thriving or struggling. The earlier you start, the better your results will be.

If your business is already in debt crisis, these Danish lessons can still help guide your financial recovery. Combined with professional advice from a licensed insolvency trustee, they provide a roadmap back to financial health.

Business debt crisis consultation in Toronto office with CN Tower skyline background
debt crisis

When to Call a Licensed Insolvency Trustee

Don’t wait until creditors are knocking down your door. The best outcomes happen when business owners seek help early.

Call immediately if:

  • You’re using credit cards for business expenses
  • Missing any loan payments
  • CRA is demanding payment
  • Suppliers put you on cash-only terms
  • Considering borrowing against your home
  • Losing sleep over business finances

What to expect in our first meeting:

  • Free consultation and options review
  • Honest assessment of your situation
  • Clear explanation of all solutions
  • No pressure to file if other options exist

Your Action Plan: Recovery Is Possible

Toronto’s business debt crisis is serious, but recovery is always possible with the right approach. I’ve guided hundreds of GTA business owners through financial difficulties.

Your immediate next steps:

  1. Face the numbers honestly – create that daily cash flow tracker
  2. Get professional help – talk to a licensed insolvency trustee
  3. Communicate proactively – call creditors before they call you
  4. Focus on cash flow – every decision should consider cash impact
  5. Plan for recovery – what will your business look like post-crisis?

Remember: The longer you wait, the fewer options you have. But even in the worst situations, there’s usually a path forward.

Why Experience Matters in a Debt Crisis

Not all insolvency trustees understand business; some focus only on the consumer market. We specialize in owner-managed business insolvencies, working in the GTA and the wider Ontario market. We know local conditions and have relationships with Toronto-area lawyers, accountants, banks, and others. We know which solutions work for different business types.

Our approach is straightforward: preserve what can be saved, eliminate what can’t, and help you move forward with confidence.

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debt crisis

Frequently Asked Questions About Toronto’s Business Debt Crisis

Answers from Ira Smith Trustee & Receiver Inc., Licensed Insolvency Trustee with years of experience helping GTA businesses

What is the current state of Toronto’s business debt crisis?

Toronto is facing its worst business debt crisis in decades. The numbers are shocking, and every business owner needs to understand what’s happening.

Here’s the reality: Business failures in Canada jumped 87.2% in early 2024 – the biggest increase in 37 years. Right here in Toronto, business closures climbed from 0.4 per 1,000 businesses in 2021 to 0.7 in 2023. That represents hundreds of local businesses shutting their doors permanently.

What’s really concerning is that over 309,000 Canadian businesses missed at least one credit payment in early 2025. That’s more than 1 in every 10 businesses struggling to pay their bills. Ontario leads the country in payment problems.

How did COVID-19 contribute to the debt crisis, and what permanent changes did it bring?

COVID-19 didn’t just create a temporary problem – it permanently changed how business works in Toronto. As someone who helped many businesses through the pandemic and since then, we saw this transformation firsthand.

The Initial Shock When lockdowns hit in March 2020, downtown Toronto emptied overnight. Restaurants, hotels, retail stores, and service businesses lost customers immediately. Some sectors saw 25% revenue drops in weeks.

The government launched the CEBA program, giving $49 billion in loans to nearly 900,000 businesses. At the time, this felt like a lifeline. However, many business owners didn’t realize that CEBA wasn’t free money – it was a loan with delayed payments.

Permanent Changes That Hurt Businesses The pandemic created a “new normal” that many businesses still can’t adapt to:

  • Remote work became permanent – Downtown Toronto office vacancy hit 18.2%
  • Online shopping exploded – Many customers never returned to physical stores
  • Business travel disappeared – Hotels and corporate catering lost their biggest clients
  • Consumer habits shifted – People became more price-conscious and cautious about spending

The Technology Investment Burden Every business now needs strong online capabilities. This means ongoing costs for e-commerce platforms, cloud systems, and staff training. For businesses already struggling with a debt crisis, these necessary investments create additional financial pressure.

In our practice, we see businesses that survived the initial COVID shock but are now failing because of the costs of adapting to these permanent changes.

What are the main reasons businesses are struggling to pay their bills?

After helping many GTA businesses, we see the same problems over and over. It’s not just one issue – multiple factors are hitting businesses at the same time.

Customers Have Less Money Your customers are financially stressed too. Average credit card spending dropped $107 per month in early 2025. When families cut back on spending, your revenue drops immediately.

Consumer debt in Canada hit $2.55 trillion. Ontario homeowners saw mortgage payments jump after renewal. When your customers are struggling with their own bills, they stop spending on non-essentials.

Operating Costs Keep Rising While customer spending drops, your costs keep climbing:

  • Food costs: up 5.8%
  • Rent and utilities: up 6.0%
  • Employee wages: up 4.8%

This creates a profit squeeze from both directions – less revenue coming in, more costs going out.

CEBA Loans Are Now Due This is a big one many business owners forgot about. As of January 2024, 161,000 businesses still owed $7.8 billion in CEBA loans. These loans now charge 5% annual interest. What felt like “emergency help” became another monthly payment.

New Regulations Add Costs Toronto keeps adding new rules that sound good but cost money:

  • New nightclub licensing requirements
  • Digital platform worker protections
  • Updated building codes
  • “Renoviction” bylaws for landlords

Each regulation adds compliance costs when businesses can least afford them.

How do tightening credit markets and inflation make the debt crisis worse?

High interest rates created a perfect storm that’s crushing Toronto businesses. Let me explain how this works.

Borrowing Became Expensive Our entrepreneurial business clients say high interest rates prevent them from expanding or investing. When you can’t borrow money to grow or even maintain your business, you’re stuck.

The Mortgage Renewal Shock Ontario homeowners face payment increases averaging $680 monthly when their mortgages renew. This leaves families with even less money to spend at local businesses.

The Inflation Squeeze While national inflation dropped to 3.8%, key business costs stayed high:

  • Food prices: up 5.8%
  • Shelter costs: up 6.0%
  • Overall prices: up 11.4% over two years

The Vicious Cycle Here’s how it all connects: Higher costs force businesses to raise prices → Higher prices mean fewer customers → Fewer customers means lower revenue → Lower revenue makes it impossible to pay debts.

Add unemployment rising for eight straight quarters to 7.5%, and you have a situation where businesses face higher costs and fewer customers at the same time.

What cash flow management strategies work for struggling businesses?

Cash flow management isn’t a monthly task anymore – it’s daily survival. Here’s what actually works, based on my experience with hundreds of struggling businesses.

Track Money Every Day Check your bank balance every morning with your coffee. Use a simple 13-week cash flow forecast to know exactly what’s due when. This isn’t busy work – it’s survival.

Speed Up Money Coming In

  • Accept all payment methods (credit cards, e-transfer, mobile payments)
  • Offer 2% discounts for payments within 10 days
  • Call customers with overdue accounts personally
  • Send invoices the same day you deliver goods or services

Slow Down Money Going Out

  • Pay critical suppliers first (those who could shut you down)
  • Use electronic payments to control timing
  • Negotiate payment plans before you’re in trouble
  • Consider temporary hour reductions before layoffs

Priority Order for Tight Times When cash is extremely tight, pay in this order:

  1. Payroll and government deductions (CRA will shut you down)
  2. Critical suppliers (those who keep you operating)
  3. Rent and utilities (you need a place to work)
  4. Secured loans (they can seize your assets)
  5. Unsecured loans and credit cards (last priority)

What debt restructuring and financing options actually work for businesses in trouble?

We use every option available to help Toronto area companies conquer GTA busines insolvency. Here’s what actually works in real situations.

Debt Restructuring Options

  • Informal arrangements – Sometimes I can negotiate directly with creditors. Last month, I reduced a restaurant’s monthly payments from $12,000 to $4,000.
  • Consumer proposals – If you’ve personally guaranteed business debts, this can reduce your personal liability by up to 80%.
  • Business proposals – For larger companies, we can propose reduced payments to all creditors at once.
  • Strategic bankruptcy – Sometimes closing one business cleanly lets you start fresh without old debts following you.

Asset Management That Generates Cash

  • Sale-leaseback – Sell your equipment or building, then lease it back. This generates immediate cash while keeping what you need to operate.
  • Asset liquidation – That unused equipment or excess inventory can become debt payments.
  • Intellectual property licensing – License your processes or customer lists for ongoing revenue.
  • Real estate optimization – Sublease unused space or downsize to reduce overhead.

Financing When Banks Say No

  • Canada Small Business Financing Program – Up to $1 million with government backing
  • Business Development Bank of Canada – They’ll work with businesses other lenders won’t touch
  • Invoice factoring – Sell your unpaid invoices for immediate cash (usually 80-90% of value)
  • Revenue-based financing – Repay based on monthly sales rather than fixed payments

What can Toronto businesses learn from how Denmark handles a debt crisis?

After studying international approaches to a business debt crisis, Denmark offers four practical lessons for Toronto companies.

Have Clear Financial Rules Like Denmark’s government, your business needs clear procedures. Know who can authorize spending. Set borrowing limits. Create rules for paying suppliers.

In my experience, businesses with clear financial procedures survive crises better than those making it up as they go.

Manage Risk Before Problems Start Denmark doesn’t wait for a debt crisis – they plan ahead. Ask yourself:

  • What could go wrong with my cash flow?
  • Which customers might stop paying?
  • What happens if my biggest supplier demands cash only?
  • How would a recession affect my business?

Be Transparent About Your Situation Denmark’s openness builds trust and keeps borrowing costs low. Be honest with your bank about cash flow challenges, suppliers about payment timing, and your accountant about financial concerns.

I’ve seen businesses get better deals from creditors simply by being upfront about their situation.

Think Long-Term, Not Just Survival Don’t just ask “How do I pay this month’s bills?” Instead ask “How do I build a business that can handle future challenges?”

This might mean accepting higher costs now for more reliable suppliers, building cash reserves, or developing multiple revenue streams.

When should I call a licensed insolvency trustee for help?

Don’t wait until creditors are knocking down your door and you are in full debt crisis mode. The best outcomes happen when business owners seek help early, while they still have options.

Call immediately if you’re:

  • Using credit cards for business expenses
  • Missing any loan payments
  • Getting demands from CRA
  • Being put on cash-only terms by suppliers
  • Considering borrowing against your home
  • Losing sleep over business finances

What to expect in our first meeting:

  • Complete confidentiality (everything is protected by law)
  • Free consultation with no obligation
  • Honest assessment of your situation
  • Clear explanation of all available options
  • No pressure to file for bankruptcy if other solutions exist

Why timing matters: The earlier you call, the more options you have. I can often help businesses restructure and continue operating. If entrepreneurs are early enough, perhaps informal workouts are a possibility. Otherwise, perhaps Division I Proposals are the answer. But if they wait too long, your only choice might be permanent closure.

In my years as a licensed insolvency trustee, I’ve learned that business owners who seek help early have the best chance of saving their companies. Those who wait until the last minute often have fewer choices.

Remember: Asking for professional help isn’t admitting failure – it’s taking control of your future and finding the best path forward for your specific situation.

Take Action Today

The Toronto business debt crisis won’t solve itself. But with proper guidance, your business can not only survive but also emerge stronger and more resilient.

If you’re struggling with a business debt crisis, don’t suffer in silence. Contact me for a confidential consultation. We’ll review your situation, explore all options, and create a plan that works for your specific circumstances.

Asking for help isn’t admitting failure – it’s taking control of your future.

As someone who has helped many Canadian businesses and business owners, I’ve seen companies survive and thrive even in the toughest times. The businesses that succeed are those that face reality honestly, adapt quickly, and aren’t afraid to ask for help when they need it.

If your business is facing financial challenges, don’t wait until it’s too late. Early intervention provides more options and better outcomes. Contact Ira Smith Trustee & Receiver Inc. today to discuss your situation confidentially and explore your options.

You’re not alone in this. There’s a path forward, and it starts with reaching out for the right kind of help. Take that step—you deserve it. If you’re a GTA resident dealing with an overwhelming debt crisis, don’t wait for your credit situation to get worse. As a licensed insolvency trustee serving Toronto, Mississauga, Brampton, Markham, and surrounding areas, I’m here to help you understand your options.

Free consultation available:

  • No obligation to proceed
  • Complete review of your Canadian business debt and credit situation
  • Practical next steps you can take immediately

Remember: Your current financial situation doesn’t define your future. With the right help and information, you can overcome both a debt crisis and credit score problems.

As a licensed insolvency trustee in the Greater Toronto Area, I tell consumers and business owners to see financial problems not as failures but as challenges. Proper guidance can solve them. By knowing the warning signs of insolvency and getting professional advice early, many people and businesses find a way forward. They can restructure, make strategic changes, or wind down in an orderly way that protects future chances.

Remember: The earlier you seek help for company insolvency concerns, the more options you’ll have.

If you or someone you know is struggling with too much debt, remember that the financial restructuring process, while complex, offers viable solutions with the right guidance. As a licensed insolvency trustee serving the Greater Toronto Area, I help Canadian entrepreneurs understand their options and find a path forward during financial challenges.

At the Ira Smith Team, we understand the financial and emotional components of a debt crisis. We’ve seen how traditional approaches often fall short in today’s economic environment, so we focus on modern debt relief options that can help you avoid bankruptcy while still achieving financial freedom.

The stress of financial challenges can be overwhelming. We take the time to understand your unique situation and develop customized strategies that address both your financial needs and emotional well-being. There’s no “one-size-fits-all” approach here—your financial solution should be as unique as the challenges you’re facing.

If any of this sounds familiar and you’re serious about finding a solution, reach out to the Ira Smith Trustee & Receiver Inc. team today for a free consultation. We’re committed to helping you or your Canadian company get back on the road to healthy, stress-free operations and recover from financial difficulties. Starting Over, Starting Now.

The information provided in this blog is intended for educational purposes only. It is not intended to constitute legal, financial, or professional advice. Readers are encouraged to seek professional advice regarding their specific situations. The content should not be relied upon as a substitute for professional guidance or consultation. The author, Ira Smith Trustee & Receiver Inc., and any contributors do not assume any liability for any loss or damage.

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Brandon Blog Post

ENTREPRENEURIAL CANADIAN BUSINESS BANKRUPTCIES: THE TIP OF A HUGE ICEBERG?

Insolvency for business including business bankruptcies

In the last two Brandon’s Blogs, I wrote about personal bankruptcy. The topic was the class of debts not released by a person’s discharge from personal bankruptcy. In this Brandon’s Blog, I discuss insolvency for business, and specifically, business bankruptcies, as a result of the recent report by the Canadian Federation of Independent Business (CFIB).

If a business is incapable to pay its financial obligations as they come due, it might deal with some negative effects, including legal action. However, this does not have to damage a business’s credibility forever, if management is prepared to take the required corrective activity before it is far too late.

If a business that is unable to pay its debts cannot turn itself around, it may be forced to declare business bankruptcies, which can have a devastating impact on the business and its employees.

What will happen to the company if it is insolvent?

If your company is financially troubled, it may need to assign itself into bankruptcy. Nonetheless, business bankruptcies are not always the automatic result of being insolvent. If your business is experiencing financial problems, it is essential to speak to a bankruptcy lawyer or a licensed insolvency trustee to review all of your realistic choices. Bankruptcy should be the last choice when nothing else will work.

Case in point, the recent report issued by the CFIB on small business insolvency says that its survey finds that only 10% of business owners would certainly declare bankruptcy if they were to shut down completely.

The CFIB report is meant to give a more comprehensive view of Canadian business insolvencies (bankruptcies + proposals). The data indicates that the number of businesses filing for bankruptcy has been on the rise and is now at the highest level of business insolvencies in two years.

As we recover from the COVID-19 pandemic, Canadian small businesses face a number of challenges in returning to normal operations, including debt from necessary pivots, increased costs of doing business and trouble finding employees to work.

The CFIB study found that half of the businesses (54%) are still seeing below-normal revenues, and over 60% are carrying unpaid debt from the pandemic. Small businesses are under significant financial pressure, with little room to maneuver.

Insolvency fears among Canadian small businesses are alarmingly high, and the true scope of the problem may be even greater than what is reflected in official statistics. Business owners have a range of options available to them when faced with financial difficulties, and bankruptcy is only one of these.

The CFIB recently released report details the different ways the surveyed small businesses in Canada said they would take if they had to shut down as follows:

  • 46% – Just ceasing all operations permanently.
  • 27% – Selling or transferring ownership to another party.
  • 10% – Filing for business bankruptcies or business bankruptcy protection.
  • 10% – Unsure at this time.
  • 7% – Exploring all options.

Interestingly enough, recapitalizing the legal entity or taking on more business debt by way of loans was not one of the answers. That should tell you how tapped-out Canadian small business shareholders are and that the businesses have no borrowing base room left on their assets to increase their bank borrowings.

business bankruptcies
business bankruptcies

Business bankruptcies: The insolvency of a business – First steps

The first step for the Directors is to consult with a business bankruptcy attorney/lawyer and a licensed insolvency trustee (formerly called a bankruptcy trustee) (sometimes referred to as “Trustee”). The lawyer can confidentially discuss the situation with the Directors and develop a proposed plan to deal with the situation.

The licensed insolvency trustee will review the company’s financial position and proposed game plan, and consider all options available to the company and its Directors. In Canada, the only party licensed to run the administration of bankruptcy, or any formal insolvency process, is a licensed insolvency trustee.

The licensed insolvency trustee will want to understand fully the company’s assets and liabilities. With a clear understanding of the company’s financial status, the Trustee can explain how best to implement the plan to either restructure or liquidate the company. If necessary, the Trustee can tweak the game plan.

The next question is whether the business is viable. Does it produce goods or services that are still in demand in the marketplace? If not, one option to consider is selling the business to another company that has complementary lines of business. Would the business fit in neatly with the buyer’s existing operations?

Could it perhaps be integrated in some way that would make your standalone business, which is not currently viable, become viable? Keep in mind for this to be an option, the company would need to have a solvent business.

If you can’t sell your unprofitable but still solvent company, you could always explore the option of a statutory liquidation. This would involve liquidating all the company assets, paying off any outstanding liabilities, and then distributing the remaining amount to shareholders.

Companies under business bankruptcy protection

If your business is struggling financially but still has potential, you may be able to restructure it through business bankruptcy protection. In Canada, there are two main possible federal statutes to restructure under; (i) the Bankruptcy and Insolvency Act (Canada); and (ii) the Companies’ Creditors Arrangement Act. One of these restructuring legal proceedings is an alternative to business bankruptcies.

A proposal under the Bankruptcy and Insolvency Act (Canada) (“BIA”)

The BIA is the canadian bankruptcy legislation containing all the rules and regulations in Canada’s bankruptcy regime. However, it also includes bankruptcy options such as a Division I Proposal for debtors who owe more than $250,000. This kind of financial restructuring allows the company to remain in business while it restructures. The essence of a BIA Proposal restructuring is that the company is offering a contract to its unsecured creditors to pay less than the total it owes those unsecured creditors in return for eliminating all of its unsecured debt.

To ensure that the company can successfully implement a proposal and pay its post-filing debts, the licensed insolvency trustee will need to be satisfied that all relevant information has been obtained and that the company has a good chance of success. The company’s cash flow will need to be monitored to ensure that it is sufficient to run the business and pay for the goods and services it needs going forward.

The Trustee will send all known creditors a copy of the proposal, a portion of the company’s statement of affairs listing the company’s assets and liabilities, a list of creditors, a proof of claim form, a voting letter and the Trustee’s report providing additional information and the Trustee’s recommendation.

The meeting of creditors is then held and if the proposal is accepted by the required majority of unsecured creditors, the licensed insolvency trustee takes the proposal documentation to Court for approval. If the proposal is accepted by creditors and approved by the court, the company is now bound by the proposal.

If the companies successfully complete their financial restructuring proposal, they will avoid business bankruptcies. However, if the company fails to get creditor or court approval, or fails to successfully complete the proposal, it will automatically go into bankruptcy under the BIA.

Financial restructuring under a Companies’ Creditors Arrangement Act (“CCAA”) plan of arrangement

Restructuring through a CCAA plan of arrangement is a financial restructuring process that provides companies with a way to restructure their debts and other obligations. This process can help companies to avoid the business bankruptcy process and to continue operating while they repay their creditors. It is very similar to a BIA proposal. The main difference is that it is only for companies with debts of $5 million or more, it is much more court-time intensive and there is no automatic business bankruptcy provision. In a CCAA, the licensed insolvency trustee acts as a monitor under the CCAA to administer the restructuring process.

When you hear when a company files for protection, or bankruptcy protection, in Canada it is usually under the CCAA. In the United States, it is under Chapter 11 of the US Bankruptcy Code.

business bankruptcies
business bankruptcies

Licensed insolvency trustees say if companies are insolvent and not viable the best option may be business bankruptcies

We still want to know if the business is viable when it is insolvent. If it is viable, then we could look at doing a restructuring as outlined above. After the company is restructured, we could either keep running it or look to sell it. If there are impediments to a successful restructuring, the approach we take even through business bankruptcies will be different than if it is not a viable business model any longer.

If the business is not viable and insolvent, then there is not much that can be done. The business is financially unhealthy and the marketplace no longer wants the product or service this business provides. Therefore, we are looking at bankruptcy if there is not a secured creditor who is going to enforce their security through a receivership. Receivership is a whole topic unto itself which is for a different day.

As a licensed insolvency trustee, I am responsible for understanding all the issues in business bankruptcies and preparing the necessary documentation for limited companies to assign themselves to business bankruptcies. A meeting of directors must be called for them to resolve that the company should put its business into bankruptcy and appoint one of the directors to be the designated officer.

The officer designated by the board should be the director with the most intimate knowledge of the company’s affairs. This officer will sign the bankruptcy documentation and be the company’s representative at the first meeting of creditors.

The Trustee attends the director’s meeting and prepares the meeting minutes, or the minutes will be prepared by the directors and provided to the Trustee. Then, the licensed insolvency trustee prepares the bankruptcy documents which include the statement of affairs, which is the listing of assets and liabilities, names addresses and amounts owing to each creditor. The designated officer then attests to the truthfulness of the information and signs it all.

The companies are insolvent and have to go into business bankruptcies

The Trustee files the necessary documentation with the Superintendent of Bankruptcy, who issues a certificate of bankruptcy and appoints the Trustee. That’s when a company is officially entered into the bankruptcy process and the bankruptcy proceedings begin. This is the process of a company filing an assignment into bankruptcy.

So in a commercial bankruptcy administration, the Trustee has several responsibilities. The Trustee has to deal with the assets. The Trustee has to first determine are the assets subject to the security of a lender. Is that lender’s security good and valid?

business bankruptcies
business bankruptcies

What happens when the certificate is issued for business bankruptcies?

If every one of the assets is covered by a lender’s valid security which makes the security cover the assets in priority to the rights of a Trustee, then the bankruptcy trustee would not take steps to handle the company’s secured assets unless the secured lender particularly requests the Trustee to do so separately either as Receiver or Agent of the secured lender.

So let’s simply take the case where in bankrupting the company, the Trustee is handling the assets either due to the fact that they’re not secured or because the secured financial institution wants the Trustee to handle the secured assets within the bankruptcy (which is not normal, but not unheard of either).

The Trustee needs to make certain that the corporate assets are safeguarded, that they’re appropriately insured and that the Trustee has carried out an inventory of those assets.

The Trustee then needs to figure out how is it going to offer those business assets for sale. The Trustee must do a risk-reward analysis to see if it makes good sense for the Trustee to run the business. If so, is the Trustee looking for a sale of assets as a going-concern business sale or just shut down the business and liquidate the assets once the reasons for running the business have been met?

If it doesn’t make sense for the Trustee to run the business, the Trustee will close it down and take a look at the alternatives available. The assets can be sold by public auction, private sale or by tender sale separating the assets up into blocs. If the assets are such that they would attract a retail audience where consumers would pay more than if it was sold in lots to wholesalers, then a retail sale would be the way to go. The nature of the assets will identify what sort of sale of assets the Trustee runs.

Business bankruptcies: How will I know what’s going on?

The Trustee alerts all of the company’s creditors listed in the sworn statement of affairs of the bankruptcy in a mailing. The Trustee includes a proof of claim form so that all creditors can file their claim. The Trustee examines the claims and holds the first meeting of creditors.

After the first meeting, a meeting of inspectors is held. Inspectors are creditor representatives who assist the Trustee in providing approval for the Trustee’s recommendations and actions it wishes to take. This includes any approval of asset sales the Trustee recommends after making an informed decision. Inspectors also need to approve the Trustee’s Final Statement of Receipts and Disbursements near the end of the administration of all business bankruptcies.

business bankruptcies
business bankruptcies

Finding a Licensed Insolvency Trustee

I hope you enjoyed this Brandon’s Blog on business bankruptcies. Are you or your company in need of financial restructuring? Are you or your company unable to survive the COVID pandemic and its aftermath? The financial restructuring process is complex. The Ira Smith Team understands how to do a complex restructuring. However, more importantly, we understand the needs of the entrepreneur or the person who has too much personal debt. You are worried because you are facing significant financial challenges.

It is not your fault that you are in this situation. You have been only shown the old ways that do not work anymore. The Ira Smith Team uses new modern ways to get you out of your debt troubles while avoiding bankruptcy. We can get you debt relief freedom.

The stress placed upon you is huge. We understand your pain points. We look at your entire situation and devise a strategy that is as unique as you and your problems; financial and emotional. We know that we can help you the way we take the load off of your shoulders and devise a debt settlement plan.

We realize that people and businesses in financial difficulty need practical advice and a workable solution in an easy-to-understand financial plan. The Ira Smith Team knows that not everyone has to file for bankruptcy in Canada. Most of our clients never do, as we are familiar with alternatives to bankruptcy. We assist many people in finding the relief they need.

Call or email us. We can tailor a new debt restructuring procedure specifically for you, based on your unique economic situation and needs. If any of this sounds familiar to you and you’re serious about finding a solution, let us know.

Call us now for a no-cost initial consultation.

If you would like our free e-Book, “Closing A Business Without Going Bankrupt” CLICK THE PICTURE BELOW

business bankruptcies
business bankruptcies
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Brandon Blog Post

BUSINESS DEBT ADVICE CANADA: TROUBLE SHOOTING DEBT STRAPPED COMPANIES

business debt advice canada

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Business debt advice Canada: Introduction

When it involves money, timing is everything. Your business is getting closer to the top of its banking line and your banker is asking for more information than usual. This is where your heart starts pounding faster and your stress level increases. This is the moment you can seize to right size your business or else it very well may fail. The purpose of my blog is to give you business debt advice Canada.

Business debt advice Canada: Relationships can become strained

Relationships can become strained with your lender and suppliers when business debts are mounting and your company is facing a cash crisis. However, there are actions a borrower can take to prevent calamity. Reassuringly, most of the time, lenders would rather support you if you have a viable business plan to correct the situation going forward, and not putting you out of business.

I hope the suggestions below shows you that you should look at this as an opportunity to fix your business. I have found that in trying times when a company has mounting debts and insufficient cash, there is no replacement for good management.

A solid business plan showing how the company will turn itself around is what your lender wants to see. Communication with your lender and your suppliers is key. Do not hide from the problem. Face it head on. If your business plan shows you can turn things around, you will feel like you are dealing from a sound platform and not just running scared.

Business debt advice Canada: Take emotion out of the equation

These situations generally become more tense before they become better. You, your lender and your unpaid suppliers all want the same thing. You all want the company to be successful and profitable, and to be able to pay all of its bills in full when due. Your lender and suppliers are not out to get you. However, if they do not: (i) know that you have solid business turnaround plan; and (ii) receive ongoing information to show what steps you are taking to fix the problems, they will have no choice but to turn off the tap.

I have unfortunately seen too many companies fail in their business restructuring efforts due to lack of communication. The turnaround plan may have been sound, but nobody knew. This only creates ill will among the stakeholders and a result that nobody wants.

Business debt advice Canada: Informal and formal turnaround options

I must preface this section by saying do not be afraid to consult with a licensed insolvency trustee (LIT) for business debt advisory services. Trustees’ training makes them expert in assessing troubled business situations and implementing turnaround steps. A LIT does a lot more than just bankruptcy.

You will find it helpful to have a professional trustee assist you in developing your turnaround business plan, implementing it and keeping management focussed and accountable. You will also find it very helpful to have a LIT go with you for meetings with your banker; there will be many of those!

Business debt advice Canada: Troubleshooting

Fully understanding the full current status of the company showing signs of financial trouble is key. Things that I focus on early on when looking at troubled companies are:

  • What are all the different assets of the company and where are they located?
  • Are all the assets properly insured?
  • What is the going-concern value and the estimated liquidation value of the assets?
  • What is the full extent of all liabilities and business debt levels? This includes amounts owing to the government for:
  • What is the status of premises lease(s) for both remaining term and cost?
  • Is the cost of the leased premises above or below current market value?
  • Has anyone personally guaranteed bank debt, the landlord or any other creditor that would affect turnaround decisions to be taken?
  • Has a current crisis cash-flow statement and turnaround business plan been developed and tested for reasonableness?
  • What are the causes of the company’s current financial problems and how likely are those causes to recur?

This list is not meant to be exhaustive. No doubt other questions will arise as answers are found for these first questions. However, this is the information I first want to get before embarking on developing a restructuring plan.

Business debt advice Canada: Informal restructuring and turnaround

If the business problems have been identified early and have not been allowed to fester, then an informal restructuring may very well work. Perhaps all that will be needed is some accommodation from the lender both in time and money. Banks are quite willing to enter into a forbearance agreement with their corporate client allowing the time (and sometimes more money) to see if the turnaround plan will work.

The bank would rather have a successful turnaround than shut you down. The bank needs to know that management has the bench strength to pull off the restructuring. If not, they will expect you to have a lawyer experienced in turnarounds and a LIT active on your team.

Companies that have relatively few trade suppliers may also be able to work out a restructuring of their unsecured debt. The fewer people you have to talk to and get onside, the higher the likelihood of success. Of course, the trust developed from earlier dealings is very important. If there is no trust, or if there are just too many suppliers, an informal restructuring will not work with them.

Business debt advice Canada: Formal restructuring

The Bankruptcy and Insolvency Act (R.S.C., 1985, c. B-3) (BIA) and the Companies’ Creditors Arrangement Act (R.S.C., 1985, c. C-36) (CCAA) are the two primary Federal statutes that govern corporate restructuring in Canada. The requirements of each statute and the exact processes themselves are weighty enough to deserve their own blog. However, the takeaways from this blog on formal restructuring are:

  • In a formal restructuring, I still go through the checklist I have identified above of issues to look into.
  • Under the BIA, the restructuring section is Part I Division III of the BIA
  • If a restructuring under the BIA does not receive the necessary creditor AND court approval, the company will automatically be bankrupt
  • In a formal restructuring, the company stays in control of its assets and business operations
  • A formal restructuring invokes a stay of proceedings so no party can begin or continue litigation or enforcement action against the company
  • A company needs to have at least $5 million in debt to restructure under the CCAA
  • A BIA restructuring will be less costly than a CCAA restructuring because the company does not have to go to Court for approval every time it wishes to do something
  • The term “bankruptcy protection” in Canada, refers to a formal restructuring under either the BIA or CCAA.

Business debt advice Canada: What to do if your company has too much debt

Is your business facing financial problems? Perhaps your company is in need of a restructuring. The Ira Smith Team can develop a restructuring plan which may or may not include the need to file for bankruptcy protection.

The Ira Smith Trustee & Receiver Inc. Team understands the pain you are going through trying to keep your company alive while trying to negotiate with potential purchasers. We understand that you are playing beat the clock, and the pain and stress you are feeling thinking that you may just run out of time. The bankruptcy protection process can ease this stress and provide a level playing field so that no potential purchaser takes advantage of you.

The Ira Smith Team has a great deal of experience in running a stalking horse stalking horse asset purchase agreement. The stress placed upon you due to your company’s financial challenges is enormous. We understand your pain points. Call the Ira Smith Team today for your free consultation. We can end your pain and put your company back on a healthy profitable path, Starting Over, Starting Now.

Call a Trustee Now!