Credit stress builds for some SMBs as debt rises and bank delinquencies climb

Core Insights - Equifax Canada data reveals a widening divide in financial health across sectors and regions, with financial trade delinquencies increasing while industrial trade delinquencies decrease [1][2][9] Financial Trends - Financial trade delinquencies rose 9.02% year-over-year to 3.52% nationally, while industrial trade delinquencies fell 25.52% to 4.65% [1] - Ontario has the highest financial trade delinquency rate at 3.88%, up 12.90% year-over-year, particularly in Real Estate, Rental and Leasing (24.5% increase) and Finance and Insurance (21.3% increase) [3] - Prince Edward Island saw the fastest increase in financial trade delinquencies, climbing 32.78% year-over-year, while Quebec was the only province to report a decline of 1.29% [4] Business Debt and Restructuring - Average business debt increased 16.9% year-over-year to $30,035, driven largely by newly established firms under 12 months old, which saw a 64% surge in balances [5] - Despite rising debt levels, the number of businesses missing payments decreased by 11.09% year-over-year to 282,257 in Q4 2025 [5] - Credit mix trends indicate a shift towards structured borrowing, with installment loan balances rising 21.9% to $132,101, while credit card balances fell 5.0% and lines of credit dropped 14.7% [6] Sector Performance - Manufacturing sector health improved, with delinquencies dropping 32.2% year-over-year and the sector's health index rising 0.7% annually [7] - Service-heavy and interest-sensitive industries continue to face higher borrowing costs and reduced consumer demand [7] Small Business Sentiment - The Canadian Small Business Health Index showed a 2.4% decline in business sentiment year-over-year, indicating weakening resilience as debt loads increase [8]