With the crucial holiday period underway, small businesses across southwestern Ontario are feeling the debt pinch, according to a new report.
According to the latest Market Pulse Business Credit Trends and Insights report from Equifax Canada, business credit card debt surged 10.8 per cent annually in the third quarter of 2023, which indicated more reliance on revolving credit.
To complicate matters further, credit card payment delinquency is also up, by 3.4 per cent compared to the second quarter of this year. Credit card delinquency is defined in the report as being at least 60 days past due.
"This data suggests a shift in behaviour among businesses, with increased reliance on existing credit lines and cards," said Equifax Canada Head of Commercial Solutions Jeff Brown. "While this may reflect a cautious approach in response to rising interest rates, it also raises concerns about potential debt burdens. We will be closely monitoring both debt levels and roll rates throughout the holiday season."
Brown said with that in mind, holiday sales become all the more vital for those businesses that have become credit-dependent.
"A strong holiday season can make a significant difference for these businesses," said Brown. "Small businesses make up 37.5 per cent of the Canadian economy, and when consumers shop locally, they support these vital economic engines."
The report also showed that since the third quarter of 2022, installment loan balances fell by 3.4 per cent, and revolving credit facilities saw a 9.6 per cent balance increase.
Loan installment and line of credit delinquency also went up. Installment loan delinquency is up 13.5 per cent. Delinquencies of 30 days or more on lines of credit were up 16.3 per cent from the previous quarter.
More information can be found on the official Equifax Canada website.
