Canadian SMB Credit Stress Deepens as Debt Loads Rise and Delinquencies Diverge
Event summary
- Financial trade delinquencies rose 9.02% YoY to 3.52% nationally in Q4 2025, while industrial trade delinquencies fell 25.52% to 4.65%.
- Ontario recorded the highest financial trade delinquency rate at 3.88%, up 12.90% YoY, with real estate and finance sectors under pressure.
- Average business debt rose 16.9% YoY to $30,035, driven by newly established firms with balances surging 64%.
- Manufacturing delinquencies dropped 32.2% YoY, contrasting with service-heavy industries facing higher borrowing costs.
The big picture
Equifax Canada’s Q4 2025 data reveals a widening divide in SMB financial health, with debt-driven stress concentrated in rate-sensitive sectors like real estate and finance. The shift from revolving credit to structured borrowing suggests businesses are adapting to higher leverage, but regional disparities—particularly Ontario’s rising delinquencies—signal potential localized downturns. Manufacturing’s improvement contrasts with service-sector struggles, highlighting sector-specific vulnerabilities as central bank policies and consumer behavior diverge.
What we're watching
- Regional Stress Points
- Whether Ontario’s credit stress will spread beyond real estate and finance sectors, tightening lending conditions.
- Debt Restructuring Trends
- The pace at which businesses shift from revolving credit to structured borrowing amid rising debt loads.
- Sector Divergence
- How manufacturing’s resilience will compare against service sectors as interest rates and consumer demand fluctuate.
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