Canadian small business owners are increasingly putting their personal finances at risk to support their companies, with more than one in four surveyed saying they have been required to personally guarantee business financing, according to a new Equifax Canada survey.
The survey found that 26 per cent of business owners had been required to provide a personal guarantee to obtain business financing, potentially putting savings, homes and other personal assets at risk. Another 21 per cent said they had applied for or opened a personal line of credit as a financial safety net for their business during the past two years.
The findings highlight the financial pressures facing small businesses and the extent to which owners may be relying on personal borrowing to maintain operations, particularly younger entrepreneurs.
Customer acquisition, rising costs top concerns
Finding and retaining customers was the most commonly cited challenge among surveyed business owners, identified by 53 per cent of respondents. Rising operating costs followed at 48 per cent, while 42 per cent cited workload, stress or mental health concerns.
Competition was identified as a challenge by 38 per cent of respondents, while 30 per cent pointed to a lack of capital or cash flow.
“Running a small business has always involved financial risk, but these findings highlight how closely business and personal finances can become connected,” said Jeff Brown, head of commercial solutions at Equifax Canada.
Equifax data also indicates that business owners, referred to as business principals in the company’s analysis, rely disproportionately on personal credit to fund and operate their companies. They have credit utilization rates 31 per cent higher than those of average consumers, personal credit balances 105 per cent higher and manage 44 per cent more credit trades.
The company also reported high usage of revolving credit and home equity lines of credit, or HELOCs, among business owners.
“This data clearly demonstrates a disproportionate dependence on personal credit to secure timely funding and sustain their operations. To put this in perspective, if businesses are relying on HELOCs to sustain operations – and they are doing this amid challenging real estate market fluctuations – this could put them in a difficult situation. When owners are using personal credit or pledging personal assets to support their business, the financial health of the company can have implications well beyond the business itself, ” notes Brown.
Younger owners more likely to put personal finances at risk
The survey found a substantial difference between younger entrepreneurs and older business owners in their reported reliance on personal guarantees and credit.
Among owners aged 18 to 34, 54 per cent said they had been required to provide a personal guarantee for business financing, compared with 15 per cent of owners aged 55 and older.
The same proportions applied to younger owners who said they had applied for or opened a personal or business line of credit as a financial safety net during the previous two years: 54 per cent among those aged 18 to 34, compared with 15 per cent among those aged 55 and older.
Among the smaller group of surveyed owners who had used a personal line of credit or provided a personal guarantee for their business, 45 per cent said the arrangements had affected their personal finances.
Reported consequences included reduced personal credit availability, cited by 20 per cent, and greater difficulty qualifying for a car loan, also reported by 20 per cent. Another 15 per cent said they had difficulty obtaining other personal credit, while 13 per cent reported difficulty qualifying for a mortgage.
“The findings suggest that younger business owners are managing several pressures simultaneously: maintaining customers and revenue, absorbing higher costs and, in some cases, finding additional financing to bridge cash-flow gaps,” notes Brown.
Business credit monitoring remains limited
Despite the reported financing pressures, awareness of business credit reports remains uneven among surveyed owners.
Just over half, or 54 per cent, said they had checked their business credit report at least once, including 34 per cent who had done so within the previous 12 months. Meanwhile, 15 per cent said they did not know how to access their business credit report, and 10 per cent were unaware their business had a separate report.
The survey also found interest in accessing credit information through existing banking relationships. Nearly two-thirds, or 64 per cent, of respondents said they would be interested in monitoring their business credit score directly through their bank’s commercial banking platform.
Among owners who had checked their business credit report within the past year, interest rose to 86 per cent. The figure was 74 per cent among owners under age 55, compared with 52 per cent among those aged 55 and older.
Last month, Equifax Canada reported on commercial credit trends, saying Canadian businesses were carrying more debt as tariffs and payment pressures deepened. That report also pointed to differences in how businesses were managing their financial obligations and allocating cash.
“You cannot manage what you cannot see,” said Brown. “Understanding a company’s commercial credit profile can help business owners better understand how lenders may view their business and the financing options that may be available to them. Making that information easier to access could help owners make more informed financial decisions.”
Equifax said it works with small-business lenders to support Canadian companies and offers a business credit report intended to provide a snapshot of a company’s financial profile.
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