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

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

A member of theMillbrook First Nation in Truro, N.S., MacDonald has been cutting clients' hairfor nearly 15 years in and aroundTruro 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 stringsas 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 saidshe 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 MacDonaldwasn'talone, especially in the Indigenous business community. WhileCOVID-19 walloped businesses indiscriminately, Indigenous-owned businesses face circumstances that have made navigating the pandemic uniquely challenging.

Hurdles faced

According to thereportfrom 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 tryto 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 respondedsaid 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'sin line with Statistics Canada data on all types of businesses.

But more than aquarter of Indigenous-ownedwho appliedfor 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 pictureof the unique problems faced by a key group of Canadianentrepreneurs.

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 oftheCanadian Council for Aboriginal Business, said in an interview with CBC News thatshe 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 programssuch as the Canadaemergency response benefit (CERB)to more business-focused lending programssuch as the Canada emergency business account (CEBA).

But Bull said the programsdidn't factor in the specific circumstances that many Indigenous businesses face, and thereforeweren't as effective as they could be.

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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 businessesdon't have arelationship withtraditional 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 Nationgovernment 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 manybusinesses on reserves don't have real estate assets due tostipulations in the Indian Act, the federal law that governs manydealings 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 toShannon Pestun, who is Mtisand is the co-founder of the FinanceCafe, a Calgary-based startup that aims to help women who ownsmall businesses withfinancial literacy.

"Indigenous entrepreneurs ...tend to be smaller andmore sole proprietorsworkingfrom 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, notingthe original financial requirements of some of the support programs were especially onerous because they required a certain number of staffandthat 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.

"Alot 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," Cadieuxsaid. "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."

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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 businessesthatare helping their communities," she said.

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