Installment loans surged higher in the second half of 2023 compared to the previous year, according to data from Equifax Canada. 

The agency’s 2024 Business Credit Trends Report attributes a 74 per cent year-over-year spike in new installment loan originations during the latter half of last year to Canadian businesses rushing to meet the Canadian Emergency Business Account (CEBA) forgiveness deadline of Jan. 18. 

"While it may feel like CEBA is moving into the rear-view mirror, it’s truly a matter of businesses turning to new installment loans to secure their financial stability," said Jeff Brown, head of commercial solutions for Equifax Canada, in a press release Tuesday.

"Many businesses were focused on the forgiveness deadline and paying back debt to take advantage of this timeline. The increased reliance on these loans has also contributed to a notable rise in delinquencies, particularly in installment loans."

Equifax Canada also highlighted a rise in delinquencies in industrial trade, which increased from 10.1 per cent in the first quarter of 2023 to 12.2 per cent in the first quarter of 2024. 

Financial trades, such as credit accounts between businesses and financial institutions, also faced an uptick in delinquency rates, with 30-plus day delinquencies jumping from 3.3 per cent in the first quarter of last year to 3.4 per cent in the first quarter of this year. 

Equifax attributes this rise in delinquency rates to missed payments on installment loans and lines of credit. Despite credit card delinquencies remaining generally low, businesses that have opened new credit cards over the last two years are missing payments at a much faster rate on those cards, Equifax reports. 

“It is more important than ever to monitor newer accounts for early warning signs of financial stress as it might take some time to see their impact on portfolios,” Brown said in the statement. 

Aside from the difficulties of increasing delinquencies, Equifax also reported that Canadian companies are struggling under the pressure of rising debt. Outstanding financial trade balances have hit a new high in the first quarter of 2024, reaching $31.9 billion, a 7.4 per cent increase from the first quarter of last year. 

Despite the challenges of increased debts and delinquencies, Equifax also reported a 30 per cent increase in new businesses opening in the first quarter of 2024.

The agency outlined a 2.4 per cent year-over-year increase in inquiry volumes for financing during the first quarter, which Equifax says reflects strong demand from businesses. 

Equifax says that more than 53,000 Canadian businesses have opened in the first quarter of 2024, which is a notable 30 per cent jump from the first quarter of 2023. 

 The central bank plays a role in this business boom, according to the report. 

“The recent rate cut by the Bank of Canada offers hope that we could be on a trend towards lower rates if inflation remains in check,” Brown said in the statement. “Businesses may get some breathing room on debt payments, which could potentially free up resources for growth.”