June 22, 2023 | Equifax: Canadian Business Revolving Debt is “Worrying Trend”

New data from Equifax shows that in the first quarter of 2023, Canadian businesses increased their credit card balances by 15 percent and lines of credit by 11 percent while the total balance outstanding on bank-issued installment loans fell 2.4 percent. See Businesses’ changing credit usage a “worrying trend”: Equifax.

Jeff Brown, head of commercial solutions at Equifax Canada, said the shift in credit usage by businesses is alarming.

“It’s not something we’ve seen in the past few years,” he said. “This is kind of like an early warning indicator.”

Instalment loans are generally used for growth and expansion, Brown said.

“You have to be spending money to be making money as a small business,” he said. “When you see a lapse in that, you see a growth in credit card spends, typically, it’s a sign of financial instability.

…With many businesses already holding extra debt from the pandemic, such as from government loan programs, racking up credit card debt could put businesses in a difficult hole to dig themselves out of, Brown said.

General conditions for businesses are getting tougher, said Pedro Antunes, chief economist at the Conference Board of Canada.

Businesses relying on short-term credit products is “not a good sign,” he said.

Danielle Park June 22nd, 2023

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