Financial Stability Report—2026
Canadian businesses remain in good financial shape overall, but risks are building. Trade uncertainty and geopolitical tensions could create new stress for some firms.
The vulnerabilities of non‑financial businesses in Canada have remained largely unchanged over the past 12 months. Financial health has remained broadly stable even in sectors that are the most vulnerable to US tariffs and trade policy uncertainty, such as manufacturing. Indicators of financial stress among businesses plateaued in the second half of 2025 after increasing for several years.
However, risks to Canadian businesses are rising. Both ongoing trade uncertainty and the war in the Middle East could put significant financial pressures on businesses.
Business financial health
Vulnerabilities remain unchanged
Canadian businesses have remained in good financial health overall since the previous Report.
Despite ongoing trade tensions, businesses continue to hold more cash and liquid assets, on average, than was typical before the pandemic. Profitability also remains solid. The combination of these two factors gives businesses a buffer to absorb negative shocks and cover unexpected costs.
Even in sectors most vulnerable to US tariffs—such as manufacturing—financial health has remained broadly stable.
Overall, business debt has risen relative to gross domestic product over the past two years, partly reflecting favourable borrowing conditions for large businesses. At the same time, the ratio of debt to assets is still below pre‑pandemic levels and has remained largely stable over the past year (Chart 9).
In recent years, large firms have issued bonds to take advantage of low borrowing costs. This has been a key reason for the rise in business debt. Small and medium‑sized businesses are generally not able to issue bonds and therefore rely primarily on banks and credit unions for financing.
Additionally, while overall business lending conditions have remained stable in recent quarters, responses to the Bank of Canada’s Senior Loan Officer Survey suggest that conditions are somewhat tighter for small businesses than for large borrowers.
Indicators of financial stress among businesses have stabilized
After increasing over the previous three years, the share of business loans that are past due stabilized in the second half of 2025. It remains low compared with previous periods of significant stress, such as the 2008–09 global financial crisis (Chart 10).
Impairments on loans to small businesses have continued to increase in recent months, while they have decreased for loans to large businesses (Chart 11).