Canadian Businesses Struggle with Debt Distress and Rising Delinquency Rates

07 Oct, 2024

Rising interest rates, inflation, and natural disasters have created a challenging environment for Canadian businesses, leading to increased financial distress. New data reveals that many Canadian businesses are struggling to meet their financial obligations, with a noticeable rise in delinquency rates across key sectors such as construction, retail, and transportation. This situation not only reflects the financial health of these businesses but also serves as a warning sign for the overall economy, potentially indicating rising unemployment rates.

Equifax Canada reported that over 56,000 businesses missed at least one payment in the second quarter of 2024, a 10.2% increase from the previous year. The 60-day delinquency rate has risen to 3.1%, indicating deeper issues as businesses rely on new loans to pay off existing debts. High input costs and fluctuating interest rates have further exacerbated the situation, particularly in provinces like British Columbia and Alberta, where delinquency rates are significantly higher than the national average.

While there are signs of a decline in insolvency rates, businesses remain hesitant to invest, fearing the ongoing economic uncertainties. As the holiday season approaches, retailers may struggle to boost revenues amid slowed consumer spending due to personal credit challenges.

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