Canadian small businesses faced continued financial pressures in the second quarter of 2025, driven by a complex mix of macroeconomic factors and uncertain trade relations, as well as shifts in consumer and household spending, according to the latest Equifax Canada Market Pulse – Quarterly Business Credit Trends Report. Real GDP fell by 0.4%, impacting the overall business outlook.
The Canadian Small Business Health Index — a joint initiative between Equifax Canada and Business Development Bank of Canada that provides a quarterly snapshot of the health of Canadian Small and Medium Businesses — declined by 1.6% in Q2, driven by shifts in trade tensions and Canada’s widening trade deficit. At the same time, lower inflation and interest rate cuts offered some relief, helping certain businesses strengthen their overall credit performance, explained Equifax.
“Small businesses are navigating a complex environment,” said Jeff Brown, Head of Commercial Solutions, Equifax Canada. “We’re seeing sectors under stress, particularly those that represent industries tied to international trade and discretionary spending, while others 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 286K businesses missed at least one credit payment in Q2 2025, 5.6% higher than a year ago. However, at a trade level, credit stress splits, financial credit delinquencies rose 13.5% in Q2, reaching a rate of 3.48%, while industrial trade (B2B) delinquencies declined by 1.7% to 5.55%. This suggests many businesses are keeping up with supplier payments but falling behind on loans and financial obligations — a pattern consistent with firms prioritizing supplier relationships to keep operations moving, noted Equifax.
As seen in the Q2 2025 Equifax Canada Market Pulse Quarterly Consumer Credit Trends report, the average credit card spend per consumer declined by 0.4 per cent from June 2024, when adjusted for inflation, said the company.
Pullback in consumer spending seemed to affect businesses that rely on discretionary spending. In consumer-sensitive industries, delinquency levels remain sharply higher year-over-year, with delinquencies in Accommodation and Food Services businesses up 29.5%, Retail Trade up 13.3%, and Arts, Entertainment and Recreation up 7.5%, according to Equifax.
“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. “This shift in consumer spending toward essentials could be causing financial strain and delinquency in businesses that provide non-essential goods and services.
“The true economic impact of today’s trade tensions and rising unemployment will not be felt all at once. For many regions and sectors, the full effects may only materialize as the year’s economic headwinds continue to unfold.”
Province Analysis – 60+ days Delinquency Rates (Account Level)
| Province | Delinquency Rate : Financial Trades(Q2 2025) | Delinquency Rate Change: Financial Trades(Q2 2025 vs. Q2 2024) | Delinquency Rate: Industrial Trades(Q2 2025) | Delinquency Rate Change: Industrial Trades(Q2 2025 vs. Q2 2024) |
| Ontario | 3.63% | 11.79% | 5.51% | 5.51% |
| Quebec | 3.22% | 4.48% | 4.36% | -2.15% |
| Nova Scotia | 2.42% | 0.10% | 6.09% | 7.85% |
| New Brunswick | 3.01% | 11.82% | 4.57% | -7.95% |
| PEI | 2.54% | 11.22% | 4.45% | 19.54% |
| Newfoundland | 2.81% | 4.40% | 4.82% | -8.23% |
| Eastern Region | 3.47% | 9.91% | 5.04% | 2.30% |
| Alberta | 3.29% | 1.36% | 6.92% | -12.87% |
| Manitoba | 3.15% | 12.93% | 4.41% | 1.69% |
| Saskatchewan | 2.83% | 2.88% | 6.54% | 3.78% |
| British Columbia | 2.88% | 10.64% | 6.49% | -8.27% |
| Western Region | 3.06% | 5.91% | 6.40% | -8.20% |
| Canada | 3.33% | 8.67% | 5.55% | -1.70% |
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