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PayNet: Canadian Credit Trends Show Slowing Investment, Return of Risk

May 16, 2014, 06:00 AM
Filed Under: Economy

Commercial borrowing by small and medium-sized businesses in Canada moderated in Q1 2014 but was still above the Q1 2013. The Canadian Business Lending Index (CBLI) which measures the volume of new commercial loans and leases to small businesses declined 1% to 220 from Q4 2013.

Decreased investment occurred after the previous 8 quarters exhibited an average 22% year over year growth rate  CBLI increased 13% from the same quarter one year ago, which is the smallest year over year increase since Q3 2011.
“Canadian businesses are still positioned for continued growth, however the pace of investment will be tempered by financial risk rising,” says Anthony Zambon, Director, PayNet Canada. ”The slight decrease in investment in the first quarter may simply be a dent in the growth curve as lenders step back to assess their delinquency and businesses reassess their own needs in the current economy.”
The CFLA Business Credit Delinquency (BCD) moderate loan delinquencies increased significantly to 2.03% (vs. 1.47% in the U.S.) This is up 55 points from the last report and is in line with an increase in risk taking.

“Increasing loan delinquencies is a concern as both moderate and severe delinquencies exceed U.S. levels for the first time Zambon added. This latest report indicates the business cycle is in a maturing growth stage, with investment moderated slightly as delinquencies have increased.”

The CFLA Business Credit Delinquency (BCD) Trends reflect the percentage of Canadian businesses that are more than 30 days past due or 90 days past due with Canadian finance companies. The BCD Trends measure small business financial stress and provide an early warning of future insolvency.

 The Canadian Business Lending Index (CBLI) measures the volume of new commercial loans and leases to small businesses indexed so that January 2005 equals 100. Because small businesses generally respond to changes in economic conditions more rapidly than larger businesses do, the CBLI serves as a leading indicator of the economy.

PayNet, Inc. Canada is the premier provider of risk management tools and market insight to the commercial credit industry, collecting real-time loan information from leading Canadian lenders and turning it into actionable intelligence. The company's proprietary database -- updated weekly -- is a growing collection of commercial loans and leases, encompassing more than 839,000 reported contracts worth over US$58 Billion. Using state-of-the-art analytics, PayNet converts raw data into real-time market intelligence and predictive information that subscribing lenders use to manage risk, lower operating costs, originate more loans and improve their business strategy.

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