More than 286,000 Canadian businesses missed at least one payment last quarter, up 5.6 per cent from a year earlier, a new report from Equifax Canada shows.Nathan Denette/The Canadian Press
Small businesses are keeping suppliers paid but falling behind on loans, a sign of deepening financial strain despite lower inflation and interest rate cuts.
More than 286,000 Canadian businesses missed at least one payment last quarter, up 5.6 per cent from a year earlier, a new report from Equifax Canada shows. While delinquencies on supplier payments declined 1.7 per cent, financial delinquencies – covering credit cards, lines of credit, mortgages and term loans – jumped 13.5 per cent to a rate of 3.48 per cent in the three-month period ended June 30.
“Businesses are prioritizing supplier relationships to keep operations moving, but they’re struggling on the financial side,” said Jeff Brown, Equifax’s head of commercial credit reporting, in an interview ahead of the report’s release. “That tells you the potential for growth is limited.”
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The findings underscore sharp divides across regions and sectors as small business owners fight to stay afloat in a sluggish economy. Tariffs are weighing heavily on manufacturing, and households cutting back on discretionary spending are squeezing the hospitality and retail sectors. Lower lending rates are providing some relief, but the outlook will ultimately be shaped by Ottawa’s next moves as Parliament resumes.
“What’s really going to dictate the health of small businesses moving forward is the federal budget,” Mr. Brown said. “Programs in housing, infrastructure and energy could determine whether struggling regions recover or fall further behind.”
Ontario was among the provinces showing the most stress, with financial and trade delinquencies climbing at double-digit rates and late payments in metals manufacturing up 12.1 per cent. The province’s auto sector was a rare exception, holding steady on stronger sales.
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Conditions are worse still in Atlantic Canada, where Equifax data show delinquencies rising about 16 per cent in Prince Edward Island and 9 per cent in Nova Scotia – part of a wider pattern among regions without energy or auto industry buffers.
Meanwhile, deficiency rates in Alberta fell about 2 per cent as higher oil prices lifted its energy-linked industrial base.
The divergence was echoed yesterday by RBC economists, who downgraded growth forecasts for Quebec, Manitoba and Ontario in particular, citing the doubling of U.S. tariffs on steel and aluminum and new duties on copper.
“Ontario is clearly in the eye of the trade war storm, and we expect the province to face persistent economic headwinds throughout 2025 and into 2026 as it adapts to the new rules of trade,” the analysts wrote.
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Consumer-sensitive sectors are also seeing sharp year-over-year increases in delinquencies: Accommodation and food services were up 29.5 per cent in the quarter, retail trade 13.3 per cent, and arts and recreation 7.5 per cent, as households devoted more of their budgets to essentials such as groceries and rent.
Equifax said business credit inquiries rose 7 per cent from the previous quarter, led by agriculture, construction and arts-related firms – the same sectors in which the agency reported notable job losses in June. That reflects companies seeking credit but running into tighter approvals from banks and suppliers.
Mr. Brown said many seasonal businesses are “holding their breath” heading into the holiday months, when cash-flow pressures intensify. Whether federal spending plans materialize quickly enough to blunt those pressures, he said, will determine how resilient small firms – which employ about two-thirds of Canada’s private-sector work force – prove to be in the face of trade tensions and weakening household demand.