Heading into the New Year, an increasing number of Canadians are starting their own businesses according to our recent Small Business Credit Trends. Here are seven recent small business insights and trends that can help Canadian lenders grow their business, minimize risk and acquire new clients.

The number of new small business startups is increasing

While the number of new financially active businesses isn’t quite as high as it was prior to the pandemic, a 40 per cent increase nationally is being spurred by Alberta and Atlantic Canada.

“There’s a small business revival happening, as we’ve seen tens of thousands of new businesses emerge and become financially active in 2021,” said Jeff Brown, Small and Medium Business Leader, Equifax Canada. “The entrepreneurial spirit is alive and well in Canada.” 

Forecast calls for increased demand for new credit

Government small business subsidies and credit facilities provided a financial cushion for Canadian business owners throughout the third quarter of 2021. This reduced the need for small businesses to apply for credit with higher interest rates from lenders.

Small business owners are turning to their banks for credit 

Small businesses who established credit with their suppliers were down by 20 per cent year-over year in Q3 2022. However, small business credit established with banks was up 30 per cent year-over-year. 

“Canadian businesses remained artificially supported by government subsidies and credit facilities in Q3, but that’s coming to an end,” said Brown. “With the reduction of federal small business support programs, we anticipate an upcoming resurgence for banks and suppliers in the amount of credit that will be requested by small businesses.

Banks and suppliers should expect an increase in credit demand

“This upcoming increased credit demand will put stress on lenders and suppliers alike, challenging them with whether or not they know what a successful post-government assistance small business looks like. We anticipate continued risk aversion by credit managers servicing the hospitality industry, as well as those industries struck by supply chain issues like the automotive space. Recovery in those industries will remain slow throughout 2022.”

Small business delinquencies continue to decline

Small business delinquencies continued to hit record lows, which means that any credit that small businesses have been establishing during the pandemic has been meeting the expectations of their lenders and suppliers.

Atlantic Canada and the Prairies had the highest drop in delinquencies

90-plus day delinquencies year-over-year continue to decrease with Atlantic Canada and the Prairies leading the way, with a 26.2 per cent and 21.1 per cent decline respectively. Both regions are showing a stronger long-term outlook than other provinces where long-term debt is concerned.

Small businesses are taking advantage of government subsidies 

“Moving forward, small businesses need to lean in and understand their government-based debt obligations,” added Brown. “With over 75 per cent of businesses taking advantage of the interest-free, government-backed loans, they need to weigh the pros and cons of attempting to pay these loans back before the end of 2022, versus chipping away at them over the next several years.”

Through the Canada Emergency Business Account (CEBA), the federal government has extended over $49B to more than 898K businesses since the beginning of the pandemic. Interest will start to accrue on these loans by the end of 2022, as will the end of forgiveness eligibility if the full amounts aren’t paid back prior to the beginning of the interest accrual period. The federal government will be watching this closely in Q1 to track small business growth and recovery.

We want to help Canadians live their financial best. To learn more about how understanding our latest quarterly trends can help your clients run their small business and boost your business growth, please contact your Equifax Account Representative. You can also reach us directly at 1-855-233-9226 and follow us on Twitter and LinkedIn.  

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