Equifax® Canada Insolvencies Surge Reflecting Canadian Businesses' Financial Strain

19 Mar, 2024

Equifax® Canada Insolvencies Surge Reflecting Canadian Businesses' Financial Strain

Many Canadian businesses are grappling with a challenging economic landscape, as highlighted in Equifax Canada’s latest Market Pulse Quarterly Business Credit Trends Report for Q4 2023. The report reveals a notable 41.4 percent surge in business insolvencies compared to the previous year, signaling intensified financial strain. Additionally, there's been a 14.3 percent increase in businesses failing to meet credit product payments during the same period.

A significant contributing factor to stress is repayment Canada Emergency Business Account (CEBA) loans. Following the expiration of the repayment grace period, businesses are now contending with monthly payments and higher interest rates, a departure from the initial interest-free terms. As of January 19, 2024, CEBA loans have transitioned into three-year term loans with a five percent annual interest rate.

Jeff Brown, Head of Commercial Solutions at Equifax Canada, underscores the multifaceted pressures facing Canadian businesses. He points to escalating input costs, labor expenses, subdued consumer spending, and elevated interest rates as key challenges in the current environment.

This convergence of factors is fueling a concerning trend of business failures, with insolvencies surging by 30.3 percent since 2019. Brown emphasizes the importance of strategic financial planning and proactive measures to navigate evolving market dynamics and debt management.

Furthermore, delinquencies in business credit accounts are on the rise, particularly in industrial and financial trades. Industrial trades experienced an 8.8 percent increase in 30+ day account-level delinquencies, reaching 11.2 percent, while financial trades saw a 3.1 percent rise to 3.3 percent in Q4 2023.