Small Businesses Grapple with Financial Strain, Impacting Customers

 - Despite Economic Headwinds, New Business Openings on the Rise -
Equifax Canada Market Pulse — Business Quarterly Credit Trends Report - Q2 2023

TORONTO, Oct. 03, 2023 (GLOBE NEWSWIRE) -- New data from Equifax Canada^* and a recent survey of small and medium-sized business (SMB) owners^** signal that significant challenges and concerns may lay ahead for their businesses.

Cash flow management is a pressing concern for 64 per cent of SMBs, with uncertainty about the upcoming holiday season cited as a major factor. Additionally, 53 per cent of SMBs struggle with limited access to business financing, and 18 per cent have faced past bankruptcy or insolvency, highlighting their financial difficulties. This complex financial landscape concerns 42 per cent of SMB owners.

Rising interest rates are also having financial consequences, as 75 per cent have raised their rates or pricing, and 69 per cent believe these rates negatively impact their businesses. Moreover, 57 per cent have customers who are past due on payments or invoices, with 46 per cent expecting this trend to continue in the next 12 months.

Staffing issues weigh heavily on business owners’ minds, with 53 per cent expressing worry, while 43 per cent face challenges in recruiting and retaining employees.

Confidence in the Economy and Upcoming Holiday Season
Business owners' confidence in the economy remains low, with only 10 per cent reporting heightened confidence for Q4 2023 compared to Q4 2022. This represents a significant decline from 24 per cent last year and 33 per cent in 2021. Similarly, only 15 per cent expressed increased optimism about the holiday season compared to the previous year, a notable decline from 25 per cent in 2022 and 36 per cent in 2021.

"Despite the significant financial challenges they face, small and medium-sized businesses are the backbone of our economy and have shown remarkable resilience, even in the toughest economic climates," said Jeff Brown, Head of Commercial Solutions at Equifax Canada. "They're dealing with staffing shortages, rising interest rates, and supply chain disruptions, but they persevere."

Equifax Q2 2023 Business Credit Trends and Industry Insights
Established businesses are outpacing new businesses in trade growth, according to Equifax Canada data for Q2 2023. Credit card demand accounted for 62 per cent of new financial trade originations in Q1 2023, but rising financial stress is offset by pandemic savings, which is buoying business resilience. 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.