Trade dispute, consumer spending slowdown hurting small businesses: Equifax

Equifax Canada's latest business credit trends report says more than 286,000 businesses missed at least one credit payment in the second quarter, up 5.6 per cent from a year ago. People make their way around the Rideau Center shopping centre on Boxing Day in Ottawa, Monday, Dec. 26, 2022. THE CANADIAN PRESS/Spencer Colby

Small businesses across Canada are facing challenges as consumers cut back on spending and navigate a complicated trade landscape, a new Equifax Canada report showed.

More than 286,000 businesses missed at least one credit payment in the second quarter, up 5.6 per cent from a year ago, the agency’s business credit trends report published Tuesday, found. 

A higher delinquency rate was “expected to a certain degree,” said Jeff Brown, head of commercial solutions at Equifax Canada, though he added that even he was surprised at the size of the increase.

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“When we see delinquency levels peter over more than five per cent growth year-over-year, that’s a sign that something is either happening within our market or there’s distress coming up,” he said.

The report suggests sectors tied to international trade and consumer discretionary spending are under stress in particular.

Delinquency levels in consumer-sensitive industries — such as accommodation and food services, retail trade, and arts and entertainment — remain elevated year-over-year.  

Accommodation and food services businesses saw delinquencies jump 29.5 per cent, while missed credit payments in the retail trade were up 13.3 per cent. Arts, entertainment and recreation businesses saw delinquencies rise 7.5 per cent.

Higher delinquencies come as consumers have reined in their spending amid the higher cost of living. 

Brown said the cost of essentials such as groceries and rent continues to climb, which has impacted household discretionary spending and, in turn, hurt businesses that provide non-essential goods and services.

The average credit card spend per consumer declined 0.4 per cent from June 2024, when adjusted for inflation, the report showed.

Brown said broadly speaking, businesses are facing the impact of an economic slowdown, while many still have a lot of pandemic-related debt to pay off.

“When we have a reluctancy for consumers to spend, and we have trade uncertainty hitting certain industries, really, it is a bit of a challenge,” Brown said. 

The Canadian economy has been under pressure from tariffs imposed by U.S. President Donald Trump, with the manufacturing industry one of the hardest hit.

While many exporters have been adapting to ensure their goods are eligible to enter the U.S. tariff-free under the Canada-U.S.-Mexico Agreement, the steel, aluminum and auto sectors continue to face sector-specific levies.

Not all subsectors in manufacturing bore the same brunt though. 

Heavy metal manufacturers, for example, saw their delinquency rate spike 12.1 per cent while the automotive industry appeared resilient in the first half of the year, thanks to relatively strong sales.

The report also found the delinquency rate on bank loans, such as credit cards, lines of credit and mortgages, was higher compared with business-to-business payments, suggesting firms were prioritizing making payments to suppliers to keep their relationships with them in good standing. 

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Brown gave the example that if you’re operating a restaurant, “you want to make sure that you have a great relationship with your core supplier of bringing in food products so you can have customers in your door, and you can bring in more money.”

While many small business owners struggle to keep up with their payments, some are putting expansion plans on the back burner. 

The growth projection portion of Equifax Canada’s small business health index fell 2.4 per cent as businesses hold back on investing further into their operations. 

Brown said the upcoming federal budget could be a silver lining for small businesses since they could benefit from targeted relief programs.

“We’re all watching to see what happens ... when the fall budget does come out, and that’s really kind of the light at the end of the tunnel,” he said.

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Ritika Dubey, The Canadian Press

This report by The Canadian Press was first published Sept. 16, 2025.