Business Insights: Navigating Through a Challenging Economic Climate

Businesses are navigating through economic headwinds. Equifax Canada’s Q2 2023 Market Pulse - Business Quarterly Credit Trends Report provides valuable insights into the current landscape, highlighting three key credit trends that are influencing businesses across the country. 


Amidst inflationary pressure, businesses are seeking more credit


As inflation rates continue to rise, businesses find themselves grappling with escalating costs. Whether it's raw materials, energy, or labour, everything appears to be getting more expensive. To stay competitive and maintain their operations, businesses are increasingly turning to credit as a means of financing these rising costs. Credit card demand remained strong from the previous quarter, with 62 per cent of all new financial trade originations being credit cards. Credit card balances increased by 22.6 per cent annually while the number of accounts increased by 17.7 per cent. The increase in credit card utilization is being masked by high new originations. With businesses seeking more credit, lenders should monitor changes in credit behaviour to minimize portfolio risk

Pandemic savings: offsetting the growing financial stress


Amidst this challenging economic backdrop, it's worth noting that pandemic-related savings played a crucial role in keeping businesses resilient. The savings accrued during lockdowns and restricted operations acted as a financial buoy for many businesses. Nonetheless, Equifax Canada reports that average business debt has surged by 22.3 per cent 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.


Rising business expenses may result in increased insolvencies


Businesses will continue to be impacted by high inflation and high cost of borrowing. One of the most concerning consequences of this financial stress is the possibility of business insolvencies. With expenses on the rise and profit margins shrinking, many businesses, especially smaller ones, are at risk of going under. The increased demand for credit is, in part, a response to the need to cover operating expenses and avoid insolvency. A higher demand for credit is expected from businesses struggling with debt. As well, businesses impacted by natural disasters could take a long time to recover in this economy, and could require government support. 

For more valuable insights on the economic impact of the pandemic and global events, watch the full business quarterly trends webinar and panel discussion. 

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To learn more about business credit and debt trends, please contact your Equifax Account Representative. You can also reach us directly at 1-855-233-9226 and follow us on Twitter and LinkedIn


This article is published by Equifax Canada Co.® 2023. All rights reserved. No part of this article may be reproduced, copied or transmitted in any form or by any means, or stored in a retrieval system of any nature, without the prior permission of Equifax Canada Co. This article is for informational purposes only and is not intended to be legal or business advice. 


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