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Things are looking up, despite the downturn
PayNet Inc., which tracks commercial financing to thousands of small and medium-sized businesses, has told Reuters that Canadian commercial lending increased in the second quarter. Its latest report shows smaller companies were expanding even as economic storm clouds gather in Europe and the United States.
PayNet's Canadian Business Lending Index, which tracks the creation of new loans, rose 3 per cent in the second quarter from the first three months of the year, the largest rise since a 5-per-cent jump in the fourth quarter of 2007.
“It’s good to see some solid growth return to Canadian small and medium-sized businesses,” says William Phelan, PayNet’s president and founder. “The big question is, can we stay on track? There is a lot of uncertainty out there still. With the credit crisis in Europe and with large substantial deficits in the U.S., there is a potential to fall off track and experience some new shocks to the financial system.”
Other PayNet data released Wednesday shows that moderate loan delinquencies, which are behind by 30 days or more, went up slightly to 1.76 per cent in June, up from 1.49 per cent three months earlier. Severe loans in arrears, defined as behind more than 90 days, inched up to 0.54 per cent in June from 0.47 per cent in March.
Phelan said the increase in moderate delinquencies reflected a slight rise in risk-taking by companies but delinquencies remained far below the peak hit two years ago. PayNet’s commercial lending index is considered a leading indicator for economic growth, and it bodes well for positive Canadian GDP in the third quarter.
PayNet studied more than $16 billion of investment in property, plant and equipment by hundreds of thousands of Canadian small and medium sized businesses. “With this release we can date the bottom at September 30, 2010. Absent any economic shocks the Index ... is a milestone in the recovery of the Canadian economy," Mr. Phelan notes.
"When small and medium sized businesses are investing, the economy is growing."
A few other findings of note:
- Canadian SMBs have enjoyed a significantly lower moderate loan delinquency versus U.S. businesses for the past six years.
- U.S. and Canadian businesses both experience almost the same past-due rate in commercial loans.
- This is the first time moderate loan delinquency has been the same for both populations since reporting began in 2005.
- The same goes for severe delinquencies as Canadian and U.S. businesses are at about the same past due percentage.
Small Business Week is coming
The Business Development Bank of Canada (BDC) is preparing the next edition of its signature event, the 32nd annual Small Business Week, with the theme "Power up your business. Invest. Innovate. Grow." This year's 'week' runs from Oct. 16 to 22. "Small Business Week is an opportunity to reflect on the challenges Canadian entrepreneurs must face and how we can support them," says Jean-René Halde, BDC's president and chief executive officer. BDC has launched a microsite dedicated to Small Business Week, which includes, among other resources, a detailed pan-Canadian calendar of activities, as well as articles on the challenges facing entrepreneurs, data on the current state of Canadian entrepreneurship, and an array of success stories.
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