Alarm Bells Are Ringing for Canadian Entrepreneurs

By Pattie Lovett-Reid

Equifax Canada is out with its last Business Credit Trends Report for the second Quarter, which is disturbing. The 10.2% rise in businesses missing credit payments was most notable, with over 56,000 affected in Q2 2024.

Many businesses caught between a rock and a hard place rushed to take out installment loans to pay off their CEBA loans before the deadline while still struggling with the aftereffects of COVID-19. Coupled with elevated interest rates, this resulted in a rise in loan arrears.

Unsurprisingly, the construction and retail sectors are bearing the brunt of the financial stress and facing the most significant impact of the current situation. Regionally, the recent wildfires in Western Canada put further pressure on small businesses, where delinquencies are higher than the national average—additional challenges in an already challenging environment.

Canadians are worried. A potential economic downturn or outright recession has many stockpiling cash. According to statistics, savings are up by 7.2%. Gone are the days of discretionary spending on nice-to-have luxuries. Higher mortgage costs are also to blame. The combined results have placed retailers in a challenging position. Credit card spending has slowed, and missed payments are mounting at a critical time of the year – the holiday season.

The good news is there is likely pent-up demand, and rates are coming down. This potential for recovery should be a source of optimism. The question is, will it happen quickly enough?

It’s crucial that we take proactive measures to address these challenges. In an ironic twist, while missed payments have increased, insolvencies have slowed down. But this isn’t great news. Over 1,500 businesses filed for bankruptcy in Q 2024, which is down 23.1 % from last quarter, according to Equifax. However, it is still up 41.4% year over year.

The holiday season is crucial, and businesses close to the margin should explore their options to bridge the financial shortfalls.