Canadian small businesses face rising financial stress amid economic uncertainty

Canadian small businesses faced continued financial pressures in the second quarter of 2025, driven by macroeconomic challenges, trade tensions and shifting consumer spending, according to the latest Equifax Canada Market Pulse report.

The Canadian Small Business Health Index, a joint initiative with the Business Development Bank of Canada, fell 1.6 per cent in Q2, reflecting widening trade deficits and uneven sectoral performance.

“Small businesses are navigating a complex environment,” said Jeff Brown, head of commercial solutions at Equifax Canada. “We’re seeing sectors under stress, particularly those that represent industries tied to international trade and discretionary spending, while other businesses are holding steady or even improving. It’s a reminder that depending on your industry, the circumstances seem to be quite different across sectors.”

Over 286,000 businesses missed at least one credit payment in Q2, up 5.6 per cent from a year earlier. Delinquencies in financial credit rose 13.5 per cent, while industrial trade delinquencies fell 1.7 per cent, suggesting firms are prioritizing supplier payments over loans.

Manufacturing was hit hardest, with heavy metal manufacturing delinquencies climbing 12.1 per cent, while the automotive sector remained resilient. Ontario saw financial and trade delinquencies rise by 11.8 per cent and 5.5 per cent, respectively, while Prince Edward Island and Nova Scotia also reported sharp increases. Alberta was the only province to see an improvement, with delinquencies down two per cent.

Consumer-sensitive sectors were particularly affected. Delinquencies rose 29.5 per cent in accommodation and food services, 13.3 per cent in retail trade and 7.5 per cent in arts, entertainment and recreation.

“Despite headline inflation easing, cost of essentials like grocery and rent continued to climb, impacting household budgets which could potentially leave less room for discretionary spending,” said Brown.

Business credit inquiries dropped one per cent year-over-year, though they rose seven per cent from the previous quarter in sectors facing job losses, including agriculture, arts and construction.

“The true economic impact of today’s trade tensions and rising unemployment will not be felt all at once,” Brown said. “For many regions and sectors, the full effects may only materialize as the year’s economic headwinds continue to unfold.”