Canadian Businesses Face Mixed Fortunes as Holiday Season Approaches

05 Dec, 2024

Newer Canadian businesses are driving a notable rise  debt balances, according to the Equifax Canada Q3 Business Credit Trends Report. In Q3 2024, total business debt reached $35 billion, marking a 15.3% increase compared to the same period last year. New businesses, those established within the past 24 months, contributed significantly to this surge, showing a 25.2% rise in debt balances compared to their counterparts from Q3 2023.

In contrast, more established businesses have taken a more cautious approach. The average debt per business declined by 8.1%, reaching $25,366 in Q3 2024, highlighting a trend toward conservative debt management among longstanding enterprises. Newer businesses, while contributing to the overall economic momentum, are facing higher operational costs, which is reflected in the increasing debt levels.

The Canadian economy is showing early signs of stabilization, with recent interest rate cuts and inflation returning to the Bank of Canada’s target of 2%. The Equifax Canadian Small Business Health Index rose by 1.5% in Q3 2024, indicating improving business sentiment and more accessible credit.

As the holiday season approaches, Canadian retailers are facing significant challenges. The retail sector, in particular, is experiencing higher-than-average delinquency rates, due to factors like lower inflation-adjusted consumer credit card spending and disruptions caused by the Canada Post strike. These difficulties are especially challenging for small businesses that rely on holiday sales to boost revenues.

Trade delinquency rates also saw an increase in Q3 2024, particularly in the financial and industrial trades, which saw delinquency rates rise to 3.3% and 5.9%, respectively. However, insolvencies showed some improvement, with a 14.7% decrease from the previous quarter, as only 1,312 businesses filed for insolvency.

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