Slowing Economy, Rising Interest Rates Threaten Loan Growth in Canada

How will corporate loan growth in Canada fare as interest rates rise, global economic and political uncertainty increases and the country’s economy shows signs of slowing?

The chief financial officers (CFOs) of Canadian banks are considering this question after the country’s economy grew at a slower rate in the second quarter than had been expected in estimates compiled by Bloomberg — 3.3% versus 4.4% — Bloomberg reported Thursday (Sept. 1).

Canadian companies have been using credit facilities rather than bond markets, according to the report. From March to June, non-financial companies’ loans rose 2.73% while debt securities outstanding dipped 0.2%, per the report.

Year to date, bond issuance by non-financial firms is running at the slowest pace in six years, according to the data.

PYMNTS research released in December found that Canadian firms were struggling to get past the pandemic receivables slowdown, and that 20% of all Canadian businesses reported experiencing longer days sales outstanding (DSO) at that time than they did just prior to March 2020.

Read more: Canadian Businesses See Virtual Cards, Real-Time Payments as Key to Cutting DSO

The research also found that 37% of all Canadian firms said they were “very” or “extremely” interested in real-time payments, and that they key benefit they expected to gain from using them was the ability to make and receive payments 24/7 year-round.

“Most small businesses fail because they cannot unlock access to credit,” Nuula CEO Mark Ruddock told PYMNTS in October. “There are a lot of great businesses that failed, simply because at that moment they couldn’t unlock the credit they needed.”

See more: FinTech Nuula Sets Up Shop in Home Country, Canada

In June, Nuula, which offers tools and eased capital to small businesses, announced it had begun doing business in Canada.

“Nuula’s unique app-based approach delivers a suite of financial products and services that are designed specifically to meet the needs of small businesses, and the entrepreneurs who run them,” Ruddock said at the time.