TORONTO, ON (March 16, 2022) – Canada is experiencing a resurgence in the growth of small businesses, a year-over-year increase of 62 per cent nationally, according to Equifax Canada’s Market Pulse Small Business Credit Trends Report for Q4 2021.

Over the course of the pandemic, the federal government injected billions of dollars directly into small businesses through grants, subsidies, and loans. The Canadian Emergency Business Account (CEBA) alone accounted for over $49 billion in loans to almost 900,000 businesses.

“While there’s more room for optimism, what’s in play now for most small business owners is the balancing act between debt and delinquency,” said Jeff Brown, Small and Medium Business Leader, Equifax Canada. “In the early stages of the pandemic, small business owners tended to use government money wisely, paying off or down highly utilized accounts, or past due and delinquent accounts. This translated into stronger credit ratings allowing many small business owners to slowly increase their debts over the past year. This isn’t necessarily a bad thing because businesses need to spend money to make money. But, it’s important for small business owners to continue to make prudent financial decisions.”

New Business Growth Comparison Rates (by province)

“Small business growth is happening in every part of the country,” explained Brown. “Buoyed by government relief funds, small business owners have increased their debt burden by 20.7 per cent or by an average of $35,000 in the past 12 months.”

Quebec is leading the way in terms of new business growth, which is especially promising considering it has historically had more bankruptcies than other provinces. Since Q4 2020, Quebec has had an 11.5 per cent increase in bankruptcies, compared to Ontario which has seen a drop of 14.3 per cent. 

Early Warning Signs as Delinquencies Continue to Decline

Year-over-year, 30+ day delinquencies declined by 10.8 per cent in Q4. Most small business owners are paying off their debt obligations in a timely fashion. Delinquencies remained low in the final quarter of 2021, but there are early signs of financial stress visible for some segments. While delinquencies are well below pre-pandemic levels, Brown says we are starting to see small quarter-over-quarter increases across some provinces, including Ontario, the Prairies, and Atlantic Canada.

“There are early warning signs, which may see delinquency rates shoot higher as small businesses try to adjust to a rebuild of consumer demand and spending,” added Brown. “While many pandemic restrictions are ending, we cannot ignore the fact that inflation and interest rate hikes are a cause for concern for both consumers and small business owners. With so much uncertainty, we could see consumers hold back on their spending.”

Pierre Cléroux, Chief Economist at the Business Development Bank of Canada, echoed Brown’s comments and concerns at an online conference organized by Equifax last week.

“When we compare the overall consumer price index excluding energy, we see that energy is playing an increasingly important role in driving consumer prices,” said Cléroux. “The pricing in gasoline, transportation, food, and real-estate have gone up the most over the past two years. The burden these price increases may have on a household budget could slow down consumer spending.”

About Equifax

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