Small business growth surpasses pre-pandemic levels
TORONTO, March 16, 2022 (GLOBE NEWSWIRE) — Canada is seeing a resurgence in small business growth, a year-over-year increase of 62% nationally, according to Equifax Canada’s report on small business credit trends for the fourth quarter of 2021.
During the pandemic, the federal government has injected billions of dollars directly into small businesses through grants, grants and loans. The Canada Emergency Business Account (CEBA) alone accounted for more than $49 billion in loans to nearly 900,000 businesses.
“While there’s more room for optimism, what’s at stake now for most small business owners is the balance between debt and delinquency,” said Jeff Brown, head of small and medium enterprises, Equifax Canada. “At the start of the pandemic, small business owners tended to put government money to good use, paying off or reducing heavily used accounts, or delinquent and delinquent accounts. This resulted in stronger credit scores, allowing many small business owners to slowly increase their debt over the past year.This isn’t necessarily a bad thing, as businesses need to spend money to make money But it’s important that small business owners continue to make prudent financial decisions.
Comparison of new business growth rates (by province)
“Small business growth is happening in every region of the country,” Brown explained. “Supported by government relief funds, small business owners have increased their debt burden by 20.7% or $35,000 on average over the past 12 months.”
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|Q4 2021 vs.
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Quebec leads in terms of new business growth, which is particularly promising given that it has historically had more bankruptcies than other provinces. Since the fourth quarter of 2020, Quebec has seen an 11.5% increase in bankruptcies, compared to Ontario which has seen a 14.3% decrease.
Warning signs as delinquencies continue to fall
Year over year, delinquencies over 30 days decreased 10.8% in the fourth quarter. Most small business owners pay off their debts in a timely manner. Defaults remained low in the last quarter of 2021, but early signs of financial stress are visible for some segments. While delinquencies are well below pre-pandemic levels, Brown says we’re starting to see small quarter-over-quarter increases in some provinces, including Ontario, the Prairies and Atlantic Canada.
“There are warning signs that could see delinquency rates rise as small businesses try to adjust to a rebuild in consumer demand and spending,” Brown added. “As many pandemic-related restrictions come to an end, we cannot ignore the fact that inflation and rising interest rates are a source of concern for consumers and small business owners. With so much uncertainty, we could see consumers rein in their spending.
Pierre Cléroux, chief economist at the Business Development Bank of Canada, echoed Brown’s comments and concerns during an online conference call hosted by Equifax last week.
“When we compare the overall consumer price index excluding energy, we find that energy is playing an increasingly important role in driving consumer prices,” Cléroux said. “Gasoline, transportation, food and real estate prices have increased the most over the past two years. The burden that these price increases may have on a household’s budget could slow consumer spending.
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