Delinquency rates are at a level last seen in 2009 according to new report
They are considered to be the backbone of the Canadian economy, but many small businesses are in less than ideal health with debt among the major factors, according to a new report.
The Equifax Canada Q1 2025 Business Credit Trends and Insights Report reveals that delinquency rates among small businesses reached a level in the first quarter of 2025 that had not been seen since 2009. More than 309,000 businesses, or 11% of credit active businesses, missed at least one credit payment, a 15% year-over-year increase in business delinquencies.
And the firm’s barometer of credit health and sentiment among business owners slipped 1.5% quarter-over-quarter to 99.3, although it was up from the first quarter of 2024.
There was also a 6% decrease in the number of businesses applying for credit, perhaps indicating caution with business owners focusing on trying to manage existing debt rather than take on new borrowing, even as interest rates ease.
"The Canadian Small Business Health Index shows that business sentiment is down three per cent in Q1 2025 compared to the previous quarter," noted Jeff Brown, Head of Commercial Solutions at Equifax Canada. "The early months of 2025 are revealing the pressures the business landscape could be facing. Many businesses are caught in a squeeze from both slowing household consumption on one hand and growing business debt stress on the other."
Sectoral variations are shown in the report with Accommodation & Food Services businesses among those with the highest increase in delinquencies - missed payments jumped to 17% - and Retail Trade, where the rate hit 13%.
Consumers cut back in the first quarter with Equifax Canada’s data showing that average monthly consumer credit card spend per cardholder fell by $107 during Q1, dropping to the lowest level since March 2022.
“This seems to be a classic ripple effect,” said Brown. “Equifax data suggests when households pull back, restaurants, retailers and local service providers feel it first — and hardest. This can then travel up the supply chain, where everyone from manufacturers to transport companies feel its effects.”
There were also double-digit increases in year-over-year missed payments for Agriculture (20%), Transportation & Warehousing (19%), Real Estate (17%), Finance & Insurance (16%), and Manufacturing (10%).
“Businesses across the country and across a variety of industries are showing increased vulnerabilities as broader economic uncertainty continues,” concluded Brown. “Businesses will continue to need resilience and careful planning to navigate this economic environment.”
