PayNet, a firm that provides risk management solutions and market insight to the Canadian Commercial Finance Industry reports strong investment by privately-held Canadian businesses. The Canadian Business Lending Index (CBLI) which measures the amount of new private investment in property, plant and equipment by hundreds of thousands of private Canadian businesses jumped 26% to a new all-time high of 205 points since its inception.

This latest report continues a string of increases in growth as business investment has expanded for the 11th consecutive quarter. The 2nd Quarter’s  represents a 3% increase from Q1 2013 to Q2 2013 which is a slight slowdown from the 6% increase reported in the previous release.

 “Credit risk is also rising, though nowhere near the levels reached in 2009 at the height of the recession, , signaling a healthy return to risk- taking for Canadian small and medium privately-held companies.  This higher risk is expected, given the relatively higher investment levels by Canadian businesses,” said  Anthony Zambon, Director, PayNet Canada.

Payments 30 days or more past due rose to 1.45% from 1.35% in the prior quarter which is far less than the peak delinquencies of 3.7% on loans past due. Severely delinquent loans also rose for Canadian businesses. Second quarter loans over 90 days past due jumped to 0.53% which is an increase of 15bp from 0.38% in the first quarter of this year.  

This latest data release also shows Canadian private businesses find business conditions diverging from the U.S. companies. Investment by private small businesses in the U.S. have remained relatively dormant for the first part of 2013, and have only recently come to life. The Thomson Reuters/PayNet Small Business Lending Index (SBLI) for US companies in July jumped to 117.7 points or approximately 18% over the level of investment in 2005. The SBLI remains well below pre-recession highs of 133 points indicating the level of investment and therefore growth by these companies remains far lower than Canadian counterparts.

The CBLI reveals the services sector as the key driver of higher investment by Canadian companies. Food and accommodations, retail, transportation, professional services and wholesale businesses show substantial gains in investment activity for the 2nd quarter compared to a year ago. Agriculture producers also show large increases in investment; however, the construction and manufacturing sectors continue to be flat.

This report is further evidence of a shift in the Canadian business towards more service- based activities and is a good indicator of the full recovery from the recent recession. Consumers appear to be in better spirits after the unsettling contraction that occurred in 2009 and 2010.
 
While in Halifax, PayNet’s Canadian Business Lending Index will be presented to CEO’s and regulators at the Canadian Finance Leasing Association (CFLA) National Industry Conference September 18-20, 2013.  

The PayNet Canadian Business Lending Index is a key measure of metrics for Canadian private companies, small and medium-sized businesses, held by private owners and not traded on The Toronto Stock Exchange, which quantifies their business investment and financial health.