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Sunday, 16 May 2021 11:33 GMT

Canadian Firms Ponder How to Spend Excess Cash


(MENAFN - Baystreet.ca) Companies in this country are sitting on a record cash pile, but whether and how they spend it may determine the shape of the post-pandemic recovery, according to a recent report from the Canadian Imperial Bank of Commerce.
In the report, the bank estimated that businesses are currently sitting on $130 billion in excess cash, a level "above and beyond" what would have been the case without the pandemic.
The document followed the bank's November estimate that Canadian households — made frugal by lockdowns and layoffs — had accumulated more than $90 billion, in no small part thanks to federal aid programs.
CIBC pointed out that businesses' participation in Canada's economic recovery could be limited by a couple of factors.
One major inhibitor to business investment is the federal government's Canadian Emergency Business Account program, which provides interest-free loans of up to $40,000 and recently expanded to $60,000. More than 500,000 Canadian businesses have received CEBA support so far, which totals more than $46 billion.
The report points out that most of that cash will have to be paid back save for $20,000 which will be considered a grant if a businesses pays the rest of the loan back by December next year.
The second inhibitor lies in which sectors performed well during the pandemic.
Technology companies and manufacturers, for example, are reluctant to invest more than normal because they anticipate their demand to go down once life returns to normal.



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