TORONTO -- Canada's small businesses have collectively taken on $135 billion in debt in an attempt to survive the pandemic, a dizzying amount that could hurt the country's economic recovery, according to a report released Thursday.

The Canadian Federation of Independent Business said the average small business owner has accrued $170,000 in debt, with businesses in the hospitality, recreation and service sectors most indebted.

The debt load has left many small businesses in a precarious financial situation that could lead to a wave of closures, the CFIB warned.

The longer the COVID-19 pandemic goes on, the more bleak the outlook becomes for some small businesses, said Laura Jones, CFIB's executive vice-president.

“Over the last six months, the average debt taken on by small businesses to deal with COVID-19 has grown significantly,” she said in a statement.

“While many businesses had previously reopened and were attempting to regain lost sales, the second wave and the restrictions that came with it are putting a massive wrench in an already slow recovery for small businesses.”

The report said more than 70 per cent of business owners across Canada report that they have taken on debt to cope with the impacts of COVID-19.

When drilling down by sector, it becomes apparent that public-facing businesses with a limited ability to conduct work remotely as well as those considered non-essential have taken out loans in greater numbers.

For example, 91 per cent of businesses in the hospitality sector including bars, restaurants and accommodation took on debt, the report said.

In the arts, recreation and information sector, which includes gyms, music venues, performing arts companies and golf courses, 87 per cent of businesses took on debt, the CFIB said.

Among business owners who have taken on debt, three-quarters said it will take them more than a year to repay loans, the report said, while 11 per cent expressed concern that they may not be able to repay their COVID-19 related debt at all.

Meanwhile, 17 per cent of businesses are already actively considering bankruptcy or winding down their business, the CFIB said.

In fact, a staggering one in six small- and medium-sized businesses in Canada - a total of 181,000 businesses - are at risk of closing permanently due to COVID-19, the CFIB said. That's on top of businesses that have already closed, it added.

“Small businesses need our support through this challenging time,” said Taylor Matchett, a research analyst at CFIB and the lead author of the report.

“We must also keep in mind that businesses are much more fragile now than at the beginning of the pandemic, and every effort should be made to keep businesses open while managing the health implications of the virus.”

The CFIB's findings are based on an online survey of 3,554 small business owners in February.

This report by The Canadian Press was first published Feb, 25, 2021.