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Canadian Small Business Lending Index Decreases, PayNet

October 14, 2015, 07:00 AM
Filed Under: International

PayNet, the premier provider of risk management solutions and market insight to the Canadian Commercial Finance Industry reports decreasing investment by privately-held Canadian businesses in August 2015. The PayNet Canadian Small Business Lending Index (CSBLI) which measures the amount of new private investment in property, plant and equipment by hundreds of thousands of private Canadian businesses decreased from 130.5 in July to 128.7 in August 2015, the lowest point of the Index since October 2014. Compared to the same month one year ago, the Index is up 2%. It has been up year-over-year for nine consecutive months.
“This decrease is a signal of the continued struggles in the Canadian economy as small businesses backed off from making more investment to expand in the face of sluggish demand,” states William Phelan, president of PayNet.
In this latest report, core consumer sectors are illustrating a bright spot to fuel future GDP.growth. Food & Accommodation jumped 12% over last year as the cheaper Canadian dollar no doubt has attracted more travel.. Retail continues to deliver with investment up 7% with consumers enjoy higher discretionary spending due to lower gas prices. Professional services companies invested 25% more this year which is at least partially driven by the need to replenish equipment after underinvestment in prior years.. In a further sign of the retooling Canadian economy, manufacturers show a 6% increase in investment over the past 4 months.

Geographic trends reflect the continued transitioning economy from commodities to consumers. Western provinces have experienced decreased investment, as service providers and suppliers to the energy sector find less demand for their goods and services with Alberta (-9%), British Columbia (-1%) and Saskatchewan (-1%). Meanwhile positive growth is moving towards Manitoba (5%), Ontario (9%) and Quebec (6%).

Credit quality represents good news. The PayNet Canadian Small Business Delinquency Index decreased from 1.08% in July to 1.07% in August revealing the economy is not falling apart. Current delinquency rates are still well below the recession high of 2.55% reached May 2009, showing underlying strength with these private companies
Manufacturing, Retail, and Accommodation & Food show the highest delinquencies at 1.86%, 2.40% and 5.62% respectively. Alberta, Saskatchewan, and British Columbia show the biggest rise in delinquencies. Validation of the economic shift is reflected by Ontario’s improving credit quality with loans past due falling from 1.47% in June to 1.35% in August.

“While investment fell, borrower credit quality remained flat which indicates the impact of this recession is not having as big of an impact on business health as it did in the last one; this bodes well for the transitioning economy,” Phelan added.
The PayNet Canadian Small Business Lending Index and PayNet Canadian Small Business Delinquency Index are key metrics of small privately-held companies not traded on The Toronto Stock Exchange, quantifying their business investment and financial health.
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, worth over $70 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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