Small and Medium-Sized Businesses Face Uphill Battle Amid Financial Challenges and Uncertainty

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Cash Flow and Financing Concerns Impact Business

New data from Equifax Canada and a recent survey of small and medium-sized business (SMB) owners paint a daunting picture for businesses in Canada. Cash flow management emerges as a critical concern, with 64 per cent of SMBs troubled by it, citing uncertainty about the upcoming holiday season as a major factor. Additionally, 53 per cent grapple with limited access to business financing, and 18 per cent have faced past bankruptcy or insolvency, highlighting their financial woes. This intricate financial landscape has left 42 per cent of SMB owners deeply worried.

Impact of Rising Interest Rates and Customer Payments

Rising interest rates have financial ramifications, as 75 per cent have raised their rates or pricing, and 69 per cent believe these rates negatively impact their businesses. Furthermore, 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 Challenges and Economic Confidence

Staffing issues are a significant concern, with 53 per cent of business owners expressing worry, while 43 per cent face challenges in recruiting and retaining employees. Confidence in the economy remains low, with only 10 per cent reporting heightened confidence for Q4 2023 compared to Q4 2022.

Equifax Insights and Expert Commentary

According to Jeff Brown, Head of Commercial Solutions at Equifax Canada, “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. They’re dealing with staffing shortages, rising interest rates, and supply chain disruptions, but they persevere.”

Equifax Canada’s Business Credit Trends and Industry Insights

Equifax Canada’s data for Q2 2023 reveals that established businesses are outpacing new ones in trade growth. Credit card demand accounted for 62 per cent of new financial trade originations in Q1 2023. However, rising financial stress is offset by pandemic savings, 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, indicating potential financial challenges ahead.

Brown warned, “The rising costs of doing business may threaten a wave of insolvencies. Businesses will be dealing with the dual challenges of high inflation and the elevated cost of borrowing.”

Government Support and Tech Awareness

Government-backed loans like CEBA were crucial for Canadian businesses, but concerns loom. While 36 per cent utilized these loans, 59 per cent of business owners feel unsupported by the government. Additionally, while 58 per cent are aware of their financial profiles, only 36 per cent know their actual credit scores. The rise of artificial intelligence (AI) also raises concerns, with 49 per cent expecting it to reshape the competitive landscape.

Conclusion: Navigating Uncertain Times

Equifax Canada continues to closely monitor the credit landscape, providing crucial data to support businesses and lenders in making informed credit decisions during these uncertain times. As SMBs face significant challenges, their resilience remains a testament to their vital role in the Canadian economy.

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