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Canadian SMBs’ Lending Struggles Continue

Canadian investment in its small- to medium-sized businesses (SMBs) saw an uptick in February over the prior month, but the latest readings of small business credit data and analysis provider PayNet's lending index indicate an ongoing struggle and undefined future.

PayNet released its February Canadian Small Business Lending Index results on April 13, showing a nearly two-point bump from January, yet the index was down 5% from February 2017. Although delinquencies among SMBs decreased for the 11th consecutive time year-over-year, the number of loans past the 30-day due date increased month-over-month in February 2018, Business Wire reported, particularly in accommodation and food, wholesale, transportation and retail.

In the same report, PayNet President William Phelan said SMBs are stepping away from borrowing in the meantime after showing strong numbers in early 2017. 

"While still low by historical standards, this jump in 30-day delinquencies means Canadian private businesses are experiencing increased financial stress," Phelan noted in the Business Wire report. "Whether this rising stress is a correction from unusually low levels of delinquency or a material shift in direction remains to be seen." 

The Canadian index reading differed from the Thomson Reuters/PayNet Small Business Lending Index for the U.S., where numbers not only increased for the fifth consecutive month, but also scored the second-highest reading in history. Growing industries included construction, public administration, transportation and warehousing; however, delinquencies were still prevalent, as past dues between 31 and 90 days increased nearly 1.5% in the past year. Like Canada, U.S. small business delinquencies were seen in transportation and retail in addition to construction. 

-Andrew Michaels, editorial associate

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Wednesday, 29 June 2022