Equifax report on business lending: Canadian economy still in transition
ATLANTA-- Average delinquent balances of Canadian businesses rose substantially over the past eight quarters ending in March 2012, according to findings from a new Equifax study of business-to-business lending presented at its Equifax 2012 National Credit Conference in Montreal. "The Canadian economy is still trying to find its way in the post-recession world," said Equifax Chief Economist Amy Crews Cutts. Business-to-business lending encompasses the activity of small and medium businesses, and is an effective indicator of the nation's credit health.
"Headwinds remain for small and medium sized businesses," said Cutts. "Normally after the jobs start returning we see delinquency rates fall, and balances at-risk decline too. This is not exactly what's happening three years into recovery." Delinquent balances are rising among all timeframes: early- (30-59 days past due), mid- (60-89 days past due) and late- (90 or more days past due) stages. Since the second quarter of 2010, according to Equifax data analysis, specific increases include:
Average early-stage delinquent balances are up 35 percent
Average mid-stage delinquent balances are up 19 percent
Average late-stage delinquent balances are up 116 percent
"The good news is that total business-to-business owing is up; so B-to-B credit is becoming more widely available and companies are able to grow," said Cutts; early and mid-stage business account delinquencies have fallen for two quarters now – I am hopeful that this is an indicator that the Canadian economy is poised to transition soon from recovery into growth."
Delinquency rates, measured as a share of reported accounts, have held fairly constant over the past 8 quarters, but the recent trend is down. As of the first quarter of 2012:
Early-stage delinquent rates have declined for two consecutive quarters to 35.5%
Mid-stage delinquent rates also declined for two quarters, and now stand at 15.5%
Late-stage delinquent rates have declined for only one quarter and are at 16.3%
The wholesale and manufacturing sectors consistently have had the largest average past due credit balances over the past eight quarters. At March 31, 2012, the wholesale and manufacturing sectors both ended with average past due account balances at nearly $23,000. The government and transportation sectors have had the lowest average credit delinquencies, both ending the first quarter of 2012 at approximately $2,000.
The Equifax findings also show that dollar amount of delinquent credit balances in the early stages is more than twice the amount of mid- and late-stage delinquencies. At the end of the first quarter of 2012, early-stage delinquencies at Canadian businesses averaged $7,990, while mid-stage delinquencies averaged $2,560 and late-stage delinquencies averaged $3,020. Delinquency rates also are significantly higher in the 30-59 days past due timeframe than in longer terms.
Equifax, provider of consumer, commercial and workforce information solutions, analyzed its database of more than 2.5 million Canadian companies and more than 1.5 million monthly-reported trade lines or payment experiences as a part of its comparative analysis of early, mid and late stage business-to-business payment delinquency. Eighty percent of the businesses included in the analysis have less than 10 employees.