OTTAWA (Reuters) - Lending to small Canadian businesses edged up in February, but the number of delinquencies jumped, suggesting firms are unlikely to invest heavily in the near term, data showed on Friday.
The PayNet Small Business Lending index rose to 112.0 from a downwardly revised 110.2 in January, while borrowing by medium-sized firms increased to 190.2 from 187.5.
But compared to a year ago, small business lending was still down 5 percent and lending to medium firms slumped 18 percent, suggesting firms were pulling back after a strong 2017, said PayNet President Bill Phelan.
“The dynamics are still pointing to (companies) catching their breath,” said Phelan.
At the same time, the number of small businesses that were delinquent 30 days or more rose for the first time since January 2017 to 0.89 percent from 0.81 percent.
Increases were seen across sectors, including construction, where the delinquency rate rose to 0.90 percent from 0.84 percent, and manufacturing, which increased to 2.30 percent from 2.24 percent.
The number of firms that were 90 days or more behind increased to 0.30 percent from 0.25 percent.
Although the sizeable monthly increase in the delinquency rates is a concern, firms’ financial health still remains at a stronger level than a year ago, said Phelan.
“They’re trying to absorb all the investment they made in the first half of 2017,” Phelan said. “There’s a little bit of stress creeping in but I wouldn’t say it’s time to set the alarm bells off.”
Reporting by Leah Schnurr; Editing by Bernadette Baum