Yahoo Finance High debt, missed payments add to holiday pressure on businesses: Equifax
Canadian businesses are facing rising debt and concerns about potential delinquencies setting up the holiday season as a make-or-break period for many, according to a business credit trends report published by Equifax Canada.
Equifax said credit card debt for businesses was up 10.8 per cent in the third quarter of 2023 over the previous year, reaching $5.4 billion and indicating an increase in reliance on revolving credit.
“This data suggests a shift in behaviour among businesses, with increased reliance on existing credit lines and cards,” said Jeff Brown, head of commercial solutions at Equifax.
Brown said the data highlights the crucial role of the holiday season, which he said can make a significant difference for small businesses.
More businesses are also missing payments on credit products, as overall delinquencies rose 3.4 per cent compared to the previous quarter, the report said.
Last week, the federal government announced finalized agreements with Visa and Mastercard to lower credit card transaction fees for small businesses.
The deal will provide fee reductions of up to 27 per cent for the majority of small businesses. The new rates will come into effect in the fall of 2024.
Meanwhile, Equifax’s report said credit demand among businesses showed a seasonal drop of 1.9 per cent from last quarter, but is up 13.2 per cent year over year.
“While this may reflect a cautious approach in response to rising interest rates, it also raises concerns about potential debt burdens,” Brown said, adding that the credit bureau company will be monitoring both debt levels and roll rates throughout the holiday season.
Equifax Canada said this shows that more existing businesses are seeking credit as the end of 2023 approaches. This could be a sign of early financial stress, it said.
The data comes as Canadian businesses call on the federal government to give them more time to repay pandemic-era loans, particularly the Canada Emergency Business Account (CEBA).
A report released by the Canadian Canadian Chamber of Commerce on Dec. 13 said only 28 per cent of CEBA borrowers have fully repaid their loans so far, with 76 per cent of loans likely to be repaid by end of 2026.
Roughly half of the surveyed businesses received a CEBA loan, with construction, accommodation and food services, and mining, oil and gas showing the highest percentage of active borrowers, it said.
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Canadian Federation of Independent Business has been urging the government to further extend the loan forgiveness deadline, which is currently set to Jan. 18, 2024, to Dec. 31, 2024.
“Small businesses need financial relief now as they’re dealing with low sales, high borrowing costs, pandemic debt and labour shortages,” the group said earlier this month, adding that small businesses need more time to repay their loans.
• Email: dpaglinawan@postmedia.com
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