Business

Indigenous businesses faced barriers accessing COVID-19 relief programs, survey finds

Like businesses across the country, many Indigenous-led companies needed financial help during the pandemic. But many struggled to access support programs like the wage subsidy because of the way those programs were set up.

One quarter of respondents to survey didn't qualify, while another quarter sought help elsewhere

Shannon Pestun, the co-founder of the Calgary-based Finance Cafe, which empowers small business owners with better financial literacy, said government relief programs can be difficult to access for Indigenous businesses. (Submitted by Shannon Pestun)

Like many businesses, Carlene MacDonald's beauty salon was hit hard by the pandemic.

A member of the Millbrook First Nation in Truro, N.S., MacDonald has been cutting clients' hair for nearly 15 years in and around Truro and Antigonish. But that was before the pandemic struck in early 2020, and she soon found a lot of her business had dried up.

MacDonald's husband is a carpenter who managed to keep working outside, so the couple managed to keep food on the table. But times were tight.

"We basically just tightened our purse strings as much as possible, picking and choosing what we were spending money on," she said.

While provincial and federal governments moved to set up programs aimed at keeping businesses like hers afloat during the pandemic, MacDonald said she didn't bother applying to them. A friend with six full-time staff went through the process of applying for help, and ended up getting the equivalent of $200, so MacDonald doubted it was worth the time or effort for herself.

"I don't mean to sound ungrateful, but the work you had to do on top of keeping your salon going ... it almost wasn't worth doing."

A new report out this week suggests MacDonald wasn't alone, especially in the Indigenous business community. While COVID-19 walloped businesses indiscriminately, Indigenous-owned businesses face circumstances that have made navigating the pandemic uniquely challenging.

Hurdles faced

According to the report from the National Aboriginal Capital Corporations Association, the National Indigenous Economic Development Board and the Canadian Council for Aboriginal Business, Indigenous business owners were far less likely to find the help they needed during the pandemic, even as the government was taking steps to try to ease their burden.

In a survey of 825 Indigenous-owned businesses across the country between Dec. 18, 2020 and Feb. 1, 2021, almost half the entrepreneurs who responded said financial requirements were a major barrier to accessing aid during the pandemic. Three quarters said their business was negatively impacted by the pandemic, a percentage that's in line with Statistics Canada data on all types of businesses.

But more than a quarter of Indigenous-owned who applied for some sort of government assistance program had a hard time meeting the minimum requirements, the survey found.

Participation in the survey was voluntary and relied on a self-selection method, which means the data is not weighted and is not a truly randomized sample. But it nonetheless paints a picture of the unique problems faced by a key group of Canadian entrepreneurs.

While the future certainly looks brighter now than it did this time last year, even after all they've been through, almost half of respondents said they can't survive the next six months without help. 

Tabatha Bull, CEO of the Canadian Council for Aboriginal Business, said in an interview with CBC News that she gives the government credit for coming up with a wide variety of programs designed to help people and businesses in a hurry, from the Canada emergency wage subsidy (CEWS) to income support programs such as the Canada emergency response benefit (CERB) to more business-focused lending programs such as the Canada emergency business account (CEBA).

But Bull said the programs didn't factor in the specific circumstances that many Indigenous businesses face, and therefore weren't as effective as they could be.

WATCH | Tabatha Bull explains some of the challenges that Indigenous businesses face:

How a lack of collateral can damage a business

3 months ago
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Tabatha Bull, president and CEO of the Canadian Council for Aboriginal Business, explains how Indigenous-owned businesses face banking challenges that other businesses just don't have to deal with. 0:25

Problems with structure of loans

CEBA, for example, requires an existing relationship with a financial institution like a bank to get funding. But roughly a third of Indigenous businesses don't have a relationship with traditional banking, the survey found.

CEWS was also a problem because a lot of Indigenous businesses are structured as something known as an Aboriginal Economic Development Corporation, in which a First Nation government is a shareholder in the business.

That's an advantage when dealing with banks, who like to see collateral such as real estate when they hand out business loans. But many businesses on reserves don't have real estate assets due to stipulations in the Indian Act, the federal law that governs many dealings with Indigenous communities.

Having a government as a shareholder may be a big help when trying to convince a bank to loan you money, but it was a hindrance when dealing with some COVID-19 relief, because of the way the programs were structured.

"There was this kind of dichotomy where you've structured your business because of the Indian Act so you can get a loan and get funding, but then when the wage subsidy rolled out, it said you have a government as a shareholder, so they were not eligible," Bull said. 

"[The problems] were fixed, but that caused a delay."

Those problems are well known to Shannon Pestun, who is Métis and is the co-founder of the Finance Cafe, a Calgary-based startup that aims to help women who own small businesses with financial literacy.

Ottawa spent billions on support programs like the Canada emergency response benefit (CERB), but many Indigenous businesses owners have said meeting eligibility criteria was a barrier to accessing government funding during the pandemic. (Giordano Ciampini/The Canadian Press)

"Indigenous entrepreneurs ... tend to be smaller and more sole proprietors working from home [so they] don't have the same access to financial and social capital," she said

Hard to apply

She's not surprised that a lot of Indigenous businesses had a hard time getting the right type of help to survive the pandemic.

"The relief programs are really hard to access," Pestun said, noting the original financial requirements of some of the support programs were especially onerous because they required a certain number of staff and that the business suffered a certain amount of financial loss before being eligible for help — a bar that many one-person businesses can't reach.

That's a big reason why more than a quarter of Indigenous businesses in the survey reported seeking non-government assistance to survive during the pandemic. 

"A lot of business owners don't know what their business will look like in six months and how much cash they'll need to survive," she said.

The government seems to know it missed the mark with Indigenous businesses, but says it's a work in progress.

"We recognize that Indigenous businesses face unique challenges and may have been disproportionately affected by this pandemic due to their unique structure," said Marie-Emmanuelle Cadieux, communications director for the Minister of Indigenous Services.

"Indigenous businesses and entrepreneurs are not out of the woods yet," Cadieux said. "But we will continue to listen and respond to the needs of Indigenous partners."

Economists and policy makers say COVID-19 has caused a "she-cession," in that it has disproportionately impacted women from an economic perspective. More than half of the businesses in the survey were in the service sector, and Pestun says Indigenous women are even more likely to work in the service sector, which tend to be "the businesses hit hardest by the pandemic."

WATCH | Why the pandemic hit women harder than men from an economic perspective:

‘She-cession’ will require a different playbook for recovery, says expert

10 months ago
2:02
The federal government is planning a national child-care program as one way to help get women — who bore the brunt of pandemic job losses — back to work. It’s a key support that one economist says is key to a ‘she-covery.’ 2:02

Female Indigenous business owners can have greater challenges with things like proving credit history, she said, or dealing with lower incomes or gaps in their work experience.

"Bankers are looking at that," she said.

Ultimately, Pestun said it's to everyone's benefit for the system to do a better job of working with Indigenous businesses, especially female-owned ones, because "they're creating businesses that not only use traditional knowledge and culture but businesses that are helping their communities," she said.

"Being able to have your own company and work toward economic self sufficiency is really important to Indigenous women."

ABOUT THE AUTHOR

Pete Evans

Senior Writer, CBCNews.ca

Pete Evans is the senior business writer for CBCNews.ca. Prior to coming to the CBC, his work has appeared in the Globe & Mail, the Financial Post, the Toronto Star, Canadian Business Magazine and — believe it or not — Circuits Assembly Magazine. Twitter: @p_evans Email: pete.evans@cbc.ca Secure PGP: https://secure.cbc.ca/public-key/Pete-Evans-pub.asc

With files from the CBC's Shaina Luck and The Canadian Press

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