Canadian businesses are dealing with struggles such as rising debt levels, slowing demand for new credit and concerns about potential delinquencies this holiday season, according to a report conducted by Equifax Canada. “This data suggests a shift in behaviour among businesses, with increased reliance on existing credit lines and cards,” said Equifax Canada Head of Commercial Solutions Jeff Brown in a press release. “While this may reflect a cautious approach in response to rising interest rates, it also raises concerns about potential debt burdens.”Throughout the holiday season, Brown said Equifax will be monitoring debt levels and roll rates. Equifax said credit card debt for businesses surged 10.8% per year in the third quarter, reaching $5.4 billion and indicating increased reliance on revolving credit. When it comes to missed payments on credit products, it said more businesses are falling behind. Overall delinquencies rose 3.4% compared to the previous quarter, signalling potential challenges in debt repayment. Delinquency roll rates for supplier-based credit sit at 23.3% in the third quarter — an increase of 2.4% from the second quarter. This highlighted the risk of accounts becoming delinquent as they shift from 60 to 90 days. For delinquent accounts, it said financial trade 60- to 90-day roll rates remained steady at 31.6%, indicating persistent concerns in the financial sector. Credit demand among businesses showed a seasonal drop of 1.9% from the last quarter, but it is up 13.2% year over year. While new credit demand is often driven by new businesses, it found more existing businesses are seeking it as the end of 2023 approaches, which could be a sign of early financial stress. Beyond these latest figures, it acknowledged debt levels are driven by revolving credit products such as lines of credit and credit cards. Since the third quarter of 2022, it said installment loan balances fell by 3.4%, but revolving credit facilities saw a 9.6% uptick in balance, suggesting businesses have a preference for the latter in Canada’s high-interest rate environment.Installment loans have shown an uptick in delinquency — up by 13.5% year over year — suggesting businesses might be feeling the effects of a tougher economic climate with higher interest rates.Businesses have started to miss payments on their lines of credit, as early delinquencies grew 16.3% from the previous quarter.Brown concluded by saying the data highlights the crucial role of the holiday season for small businesses. He said a strong holiday season “can make a significant difference for these businesses.”“Small businesses make up 37.5% of the Canadian economy and when consumers shop locally, they support these vital economic engines,” he said. Canadians intended to cut back on how much they spent in the last holiday season, according to Deloitte Canada’s 2022 Retail Holiday Outlook. READ MORE: Canadian consumers to rein in holiday spending in 2022“In 2021, consumers were looking for a reason to celebrate as pandemic concerns started to abate,” said Deloitte Canada National Retail Leader Marty Weintraub. “However, this holiday season, consumers are dealing with worries from every angle: Be it economic headwinds, rising interest rates, inflationary pressures, the ‘COVID hangover,’ new and reoccurring diseases, geopolitical uncertainty and more.”
Canadian businesses are dealing with struggles such as rising debt levels, slowing demand for new credit and concerns about potential delinquencies this holiday season, according to a report conducted by Equifax Canada. “This data suggests a shift in behaviour among businesses, with increased reliance on existing credit lines and cards,” said Equifax Canada Head of Commercial Solutions Jeff Brown in a press release. “While this may reflect a cautious approach in response to rising interest rates, it also raises concerns about potential debt burdens.”Throughout the holiday season, Brown said Equifax will be monitoring debt levels and roll rates. Equifax said credit card debt for businesses surged 10.8% per year in the third quarter, reaching $5.4 billion and indicating increased reliance on revolving credit. When it comes to missed payments on credit products, it said more businesses are falling behind. Overall delinquencies rose 3.4% compared to the previous quarter, signalling potential challenges in debt repayment. Delinquency roll rates for supplier-based credit sit at 23.3% in the third quarter — an increase of 2.4% from the second quarter. This highlighted the risk of accounts becoming delinquent as they shift from 60 to 90 days. For delinquent accounts, it said financial trade 60- to 90-day roll rates remained steady at 31.6%, indicating persistent concerns in the financial sector. Credit demand among businesses showed a seasonal drop of 1.9% from the last quarter, but it is up 13.2% year over year. While new credit demand is often driven by new businesses, it found more existing businesses are seeking it as the end of 2023 approaches, which could be a sign of early financial stress. Beyond these latest figures, it acknowledged debt levels are driven by revolving credit products such as lines of credit and credit cards. Since the third quarter of 2022, it said installment loan balances fell by 3.4%, but revolving credit facilities saw a 9.6% uptick in balance, suggesting businesses have a preference for the latter in Canada’s high-interest rate environment.Installment loans have shown an uptick in delinquency — up by 13.5% year over year — suggesting businesses might be feeling the effects of a tougher economic climate with higher interest rates.Businesses have started to miss payments on their lines of credit, as early delinquencies grew 16.3% from the previous quarter.Brown concluded by saying the data highlights the crucial role of the holiday season for small businesses. He said a strong holiday season “can make a significant difference for these businesses.”“Small businesses make up 37.5% of the Canadian economy and when consumers shop locally, they support these vital economic engines,” he said. Canadians intended to cut back on how much they spent in the last holiday season, according to Deloitte Canada’s 2022 Retail Holiday Outlook. READ MORE: Canadian consumers to rein in holiday spending in 2022“In 2021, consumers were looking for a reason to celebrate as pandemic concerns started to abate,” said Deloitte Canada National Retail Leader Marty Weintraub. “However, this holiday season, consumers are dealing with worries from every angle: Be it economic headwinds, rising interest rates, inflationary pressures, the ‘COVID hangover,’ new and reoccurring diseases, geopolitical uncertainty and more.”
