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CIBC poll finds one-third of Canadian SMEs worse off because of falling loonie


TORONTO, Ont.–A new poll by CIBC finds that more than one-third (37 per cent) of Canadian small business owners say their business is worse off as a result of the falling loonie.

Highlights of the poll include:

  • 37% of business owners polled say the recent decline in the Canadian dollar against the U.S. dollar has had a negative impact on their business
  • Only 19% say they have benefited from the lower dollar
  • 44 % say the fall in the dollar has had little to no impact
  • A prior CIBC poll revealed that 65% of small business owners haven’t taken any steps to protect their business from currency fluctuations

“Some small business owners are clearly feeling the effects of a fluctuating exchange rate on their bottom line,” says Shelley Swanlund, Vice President, CIBC Business Banking and Head of Small Business. “While less than one in five have benefitted, many more are feeling the pinch. Some proactive planning now, however, can help mitigate the negative impact.”

The loonie has seen a steep decline against the greenback over the last three years, slipping nearly 30 per cent from a high ofUS$1.04 in September 2012 to a recent low of about 74 cents U.S. in September this year. D

“While the majority of owners say the drop in the value of the loonie is having an impact on their finances, we know only a third have taken action to address the business effect of a fluctuating dollar,” says Swanlund. “For businesses that need to purchase raw materials or supplies abroad or those importing goods for sale, even small swings in currency can make it harder to compete and affect their bottom line which highlights the need to have a currency strategy.”

Swanlund suggests that companies who buy products or services south of the border should open up a U.S. dollar bank account. This can be used to pay bills, and to have the opportunity to convert funds when the loonie climbs, such as in the last few weeks that saw a five per cent jump in value for the Canadian dollar.

Small business owners need to think beyond our borders

A recent report from CIBC Economics points out the importance of the small business sector to the Canadian economy noting it created 80 per cent of all new private-sector jobs in the last year. The report also highlighted that this was largely driven by the housing market and Canadian consumer spending.

Given the slowing domestic market, a weaker loonie and upswing of economic activity stateside, Benjamin Tal, Deputy Chief Economist and one of the authors of the CIBC report, says it is important for Canadian small and medium-sized businesses to become more export oriented.

“Not all business owners can continue to rely on the consumer to deliver growth, and a weaker loonie is opening up new opportunities beyond our borders,” said Swanlund. “While it needs to be carefully planned out, many businesses can benefit from a weaker dollar to look abroad for new customers, but it is important to first sit down with advisors who understand the financial, operational and logistic challenges of exporting.”

Tips for managing currency fluctuations:

  • Have a currency plan.Include a currency fluctuation strategy in your business plan. For example, CIBC small business advisors work with owners to explore options such as holding U.S. dollar accounts, using FX hedging strategies and having access to capital to address fluctuations in cash flow.
  • Build flexibility into your business model. Currency fluctuations and other unexpected expenses can catch small business owners off guard. Be sure your business can withstand temporary fluctuations in cash flow by having access to an emergency reserve fund, whether it is accumulated savings or a line of credit.

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