What's the number one concern for Canada's small business owners?

Economic headwinds are restraining business confidence says Equifax Canada

What's the number one concern for Canada's small business owners?
Steve Randall

The challenges faced by Canada’s small and medium sized businesses are multiple and are keeping a lid on optimism.

Equifax Canada’s latest research reveals that confidence among SME owners is low amid economic headwinds with just 10% of respondents feeling more confident in Q4 2023 than a year ago. This measure of sentiment was at 24% in Q4 2022 and 33% in 2021.

The holiday season isn’t seen as being a booster either with just 15% expressing increased optimism year-over-year.

The biggest concern of business owners is cash flow (64%) followed by limited business financing (53%), and the complex financial landscape (42%).

Rising interest rates have prompted 75% of poll participants to increase rates or prices and 69% believe rate hikes have negatively impacted their business.

Six in ten respondents have customers that are past due on invoices and almost half expect this trend to continue for the next year.

Staffing issues are also a concern with 53% saying they are worried and 43% facing challenges in recruiting or retaining workers.

"Despite the significant financial challenges they face, small and medium-sized businesses are the backbone of our economy and have shown remarkable resilience, even in the toughest economic climates," said Jeff Brown, Head of Commercial Solutions at Equifax Canada. "They're dealing with staffing shortages, rising interest rates, and supply chain disruptions, but they persevere."

Rising debts

Average business debt has surged by 22.3% from a year ago to $44.7K, and industrial trade delinquencies are nearing pre-pandemic levels, which could be a sign of financial challenges ahead.

"The rising costs of doing business may threaten a wave of insolvencies," said Brown. "Businesses will be dealing with the dual challenges of high inflation and the elevated cost of borrowing. We anticipate an increase in demand for credit, particularly from enterprises wrestling with existing debt. Additionally, companies impacted by natural disasters could experience extended recovery periods and require government support."

As raised by the CFIB, many businesses are concerned about repaying their CEBA loan or losing the forgivable portion of the loan.

Equifax Canada’s stats show that 36% anticipate negative impacts, 45% aim to clear debts by year-end, and 47% foresee repayments extending into 2024.

Despite all the challenges, people are still keen to run their own business and new business originations are now higher than pre-pandemic, although this is driven by seasonal trends.