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Credit planning in light of recent economic trends and the ongoing battle against COVID-19

Credit planning in light of recent economic trends and the ongoing battle against COVID-19

6 Minute Read

The pandemic brought to light a new set of realities that credit unions need to grapple with going forward. Insolvency is one of the most prominent examples.

Partner, National Credit Union Leader
Senior Vice President

It has become clear that the effects of COVID-19 will not be short-lived or transitory, but companies are finding ways to survive and thrive in the new economic environment. The widespread government relief programs that were implemented at the outset of the pandemic have given way to more targeted mandates. While the economic recovery has, on many fronts, exceeded expectations, ongoing diligence is required as companies continue to navigate unprecedented challenges, including the following:

Changing HR landscape

  • Increased resignations / retirements 
  • Emphasis on flexible work arrangements 

Supply shortages

  • COVID-19 disruptions
  • Increased consumer demand
  • Resource limitations


  • Mandatory shut down / quarantine
  • Border closures 

Increased debt load

  • Increased borrowings following the onset of the COVID-19 pandemic

Consumer and corporate insolvency filings

Consumer and corporate filings continue to be on the decline. Reported filings for the 12-month periods ending in the third quarter of 2020 and 2021 are summarized below:

Consumer Insolvencies 12 months ending Q3 2020
12 months ending Q3 2021
% Change
Total filings
Consumer bankruptcies
38,553 28,824
 Consumer proposals 69,696


Corporate Insolvencies 12 months ending Q3 2020 12 months ending Q3 2021 % Change
Bankruptcies (corps.) 1,748 1552 -11%
Proposals (corps.) 528 314 -40%
509 342 -33%
CCAA*  69 26

*Proceedings under the Companies’ Creditors Arrangement Act are similar to proposals; however, proposals are administered under the Bankruptcy and Insolvency Act. The CCAA applies to insolvent corporations that owe in excess of $5.0 million.

While the low volume of consumer and corporate insolvencies since the outset of the pandemic may seem counter-intuitive, it is largely attributable to the following:

  • Access to government relief programs such as the Canada Recovery Benefit and the Canada Emergency Wage Subsidy;
  • Access to government funding such as the Canada Emergency Business Account;
  • Better than anticipated economic resilience supported by high COVID-19 vaccination rates;
  • Widespread support from lenders or other stakeholders (e.g. Canada Revenue Agency) during the pandemic; and
  • Low interest rates.

Member support

While business resiliency may have exceeded overall expectations, both consumer and corporate members will require support to ensure they are prepared to meet the new set of economic challenges. Below are some questions to consider when assessing what support your members may require:

  • Are there specific industry and geographic considerations? Do members still have access to targeted government relief programs?
  • Have members completed contingency planning to address unforeseen interruptions, such as those resulting from mandatory shutdowns, capacity limitations, or supply interruptions? For example, if they are reliant on certain goods, have they established alternate supply sources?
  • Does the member require third-party support (accounting, legal, human resource)? Have members reconsidered their workforce policies and succession plan in light of changes in employee preferences and increased competition for talent?
  • Can members support post-pandemic borrowings, including upcoming payment deadlines under CEBA?
  • Have check-in and reporting expectations been established?

Those members in smaller communities who have historically maintained a stable business model may be most at risk if this past stability erodes their ability to act quickly. For example, while employees may have previously sought employment close to home, an increased emphasis on remote work arrangements may open unprecedented competition for talent from other geographies.

It’s important you remain proactive and diligent in your member outreach and properly assess the risk for each of your members. The lower bankruptcy and insolvency trends will reverse as government programs change and the central bank introduces higher interest rates to combat inflationary pressures.

MNP can help

People say it takes a village to raise a child and the same is true of a company. Ensure appropriate third-party supports are in place to support members during these dynamic times.

MNP is here to assist credit unions and their members to navigate the current economic environment. Please feel free to reach out to have an informal discussion with our team or to obtain a referral to trustee advisors, to address the various issues members may be facing.

Depending on your needs, where members are in distress, we can also provide support through the following types of engagements:

  1. Business reviews (“look-sees”)
  2. The scope of services varies but often include the following:

    • a review of financial position and prospects, and
    • an analysis of security and priority claims.

    While a business review is often done at the request of the lender, the findings generally provide equal value to the business owner.

  3. Monitoring
  4. May be done in conjunction with a forbearance agreement or a business self-liquidation.

  5. Formal restructurings
  6. May take the form of a proposal under the Bankruptcy and Insolvency Act or proceeding under the Companies’ Creditors’ Arrangement Act, which can be filed with the lender’s support.

  7. Formal liquidating proceedings
  8. May take the form of receiverships and bankruptcies.

Don’t get caught unprepared. As a credit union, continuing to educate your lending teams on trends and proactive planning with your members will be critical.

Contact us

To learn more, contact:

Annette Bester, CPA, CA, CIA, ICD.D
Partner, National Credit Union Leader
[email protected]

Vanessa Allen , CIRP, LIT
Senior Vice President
[email protected]


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