Equifax Canada report shows small businesses want governments to do more to offset the rising cost of goods

TORONTO — Four-in-five (82 per cent) of small business owners want governments to do more to address inflation, according to a recent survey from Equifax Canada. Within a nationwide panel of 300 small business owners, 87 per cent said they have been forced to increase prices as a result of rising business costs and 78 per cent admit that this move is hurting their business.

Small business owners are currently dealing with a myriad of challenges and concerns:

• Managing cash flows is one of the major challenges experienced by 60 per cent of survey respondents, with 59 per cent wanting to grow their business but having limited access to business financing. A few (14 per cent) have already experienced bankruptcy or insolvency of their business.
• Half of respondents (49 per cent) cited their leading concern as the cost of goods, followed by supplier product availability (42 per cent) and staffing (32 per cent).
• The top-three expenses impacting small businesses the most are products/supplies (55 per cent), fuel (54 per cent), and wages (54 per cent). Wages are significantly more likely to be the top expense impacting businesses in Quebec (30 per cent versus 16 per cent in the rest of Canada).

“Inflation and higher interest rates are beginning to weigh on the cash flow of small businesses,” said Jeff Brown, Head of Commercial Solutions, Equifax Canada. “Small business owners are juggling more now even as the pandemic becomes less of a concern. Not only are they dealing with inflationary pressures on the cost of goods, supply chain issues and the demand for increased wages, they are taking on more debt and we’re seeing delinquencies and insolvencies rise.”

Debt & Delinquencies Rising

When asked to consider their overall debt and current credit standing, four-in-ten (40 per cent) of small businesses indicated taking on extra debt during the pandemic, with similar numbers choosing to take on debt through the government (pandemic loans) (23 per cent) and the banks (21 per cent) – a smaller percentage (4 per cent), took on debt through both.

Equifax data for Q2 2022 also indicates early signs of stress as businesses struggle:

• Average debt for small businesses has increased by 14.9 per cent year-over-year and by 4 per cent compared to the previous quarter. The average balance for a small business now sits at $37,000
• Fewer new businesses opened in the summer of 2022 as compared to past years, down 49.7 per cent
• Bankruptcies were up 11 per cent year-over-year and up 12 per cent against the last quarter

“These trends signal a struggling post-pandemic recovery period,” said Brown. “Delinquency levels across all industries are rising with construction and manufacturing being the hardest hit. With interest rates continuing to hike, the quarters ahead might prove to be even more stressful for Canadian small businesses to manage.

“On a positive note, demand for credit is holding relatively steady since the end of 2020 with the higher growth coming from the low-risk segment. The story is the same regionally for the most part in the latest quarter. Quebec and Alberta display particularly strong growth in credit demand. Calgary reported the strongest growth in new lending.”