Canada’s Crossroads: Why Now is the Moment to Move from Defensive to Intentional Growth

Canada is on the defensive. We’ve skirted a recession, revenues are up (slightly) and businesses have proven remarkably resilient through back-to-back shocks, from pandemic challenges to an ongoing trade war. But beneath the surface, something else is happening. Low appetite for new debt. Shrinking cash reserves. And Canadian businesses, despite their strengths, are still playing it safe.

That caution is understandable. After years of volatility, the instinct to protect what you’ve built is a logical one. And the financial infrastructure in this country, though making progress, is still years behind where it needs to be to properly support Canadian businesses, the backbone of our economy. But caution, stretched too far, becomes its own risk. A defensive growth mode keeps the lights on. It does not build the future.

This State of Canadian Business Report for 2025 draws on Float’s proprietary data from thousands of Canadian businesses, alongside insights from our accounting partners and broader economic indicators to show you what’s working, what’s squeezing margins and where businesses need to act.

What we found: revenues grew modestly, but costs climbed almost as fast. Profit margins thinned. Operating profit declined. Cash balances dropped while debt stayed flat, with businesses burning through reserves rather than taking on new capital.

The picture is one of resilience without momentum.

This brings us to the crossroad. One path forward is the status quo: low risk, low reward. Protect what you have, wait for certainty, hope conditions improve. The other is intentional growth, which includes sharper visibility into financial operations, smarter deployment of capital and the confidence to act while others hesitate. It’s the difference between reacting to your environment and shaping it. Canadians love the idea of stability. What if we still had that but on our own terms?

Float is betting on Canada, specifically those businesses ready to take the second path of intentional growth. We are entering 2026 ready to deploy capital, tools and insights to pursue that growth with confident intention.

In the sections that follow, we unpack the economic context shaping Canadian business today, share findings from Float’s data and partner insights, and lay out what will separate winners from the status quo in 2026.

Note: Our data and partner insights primarily reflect technology-enabled and service-based, non-enterprise businesses. Industries facing direct tariff impacts, such as manufacturing, steel, mining, are navigating a different set of challenges that fall outside the scope of this report. What we’re capturing here is one piece of the broader picture: how growth-oriented Canadian businesses in our ecosystem are adapting, and what that might tell us about the road ahead.

The macroeconomic picture: Why Canadian businesses entered 2026 playing defence

Canada’s GDP grew approximately 1.2% in 2025, according to the IMF, marking the third consecutive year of below-potential expansion. Statistics Canada reported that the economy proved more resilient than many expected, particularly after a 0.4% contraction in Q2 driven by a 9.2% collapse in merchandise exports following US tariffs in April. Growth bounced back in Q3, expanding 2.6% on an annualized basis and beating market expectations of 0.5%.

Resilient, yes. But thriving? Not quite.

Canada trails its G7 peers and has for some time. The US posted 2% GDP growth in 2025, with GDP per capita growing six times faster than Canada’s, according to McKinsey. But this isn’t a resource problem. Canada boasts one of the world’s most educated workforces, high quality of life and proven ability to weather economic shocks. The gap is one of execution and confidence.

That confidence continues to erode. In November of last year, BetaKit reported that venture capital investment in Canada is down significantly, projected at $6.5 to 7 billion CAD for all of 2025, which is an 18 to 38% decline from 2024’s $7.9 billion. Fewer tech startups formed in 2025 than 2024, dropping from roughly 1,100 to 800, a staggering 27% decline. And founders are voting with their feet. The Globe and Mail reported that just 32% of Canadian-led high-potential startups launched in 2024 were headquartered in Canada, down from over 67% between 2015 and 2019.

Beyond the startup scene, business formation and closure rates overall have held relatively stable, oscillating between 4.7% and 4.8% throughout 2025, according to Statistics Canada. But stability isn’t the same as progress. The macro picture here is one of an economy holding steady rather than pushing forward, and that posture is filtering down to how individual businesses operate.

Inside the numbers: Float’s 2025 findings

Revenue is up, but costs are following suit

When we look at aggregated Float customer data across 2025, the headline is deceptively simple: revenue is up. Median revenue grew 5.09% year over year. For a year filled with many macro-economic challenges, that growth is encouraging. Businesses are successfully driving sales even in a difficult environment. 

But look closer and the picture gets more complicated. Cost of goods sold rose 3.91% and operating expenses climbed 4.37%. Revenue is outpacing costs, but barely. The margin between growth and the cost of growth is razor thin. Each dollar of revenue is costing more to generate. These businesses aren’t struggling with demand but with keeping what they earn.

Our spend trend data tells a similar story. Costs are rising across the board, but only a small fraction of businesses are leaning into growth levers. Marketing and advertising spend jumped 30%, yet just 27% of businesses drove that increase. Inventory and supplier costs rose 33%, with less than a third increasing spend significantly. Software and SaaS spend climbed 26%, concentrated among only 16% of businesses.

For those investing more in software, the bet is increasingly on AI. Among businesses that increased SaaS spend, AI-related costs grew nearly 2x faster than non-AI software from Q4 2024 to Q4 2025. OpenAI has quickly risen to become a top-seven vendor for these companies, trailing only cloud infrastructure giants like Amazon, Google Cloud and Alibaba.

The bigger pattern is clear: inflation is pushing costs up everywhere, but relatively few companies are actively investing to grow. And for those that are, those investments are eating into margins almost as fast as revenue comes in.

Mike Pinkus, Partner and Co-Founder at ConnectCPA sees this dynamic playing out. ConnectCPA is a tech driven chartered accounting firm serving predominantly Canadian SMBs between $1-25M revenue with tax, accounting, bookkeeping, controllership, and cloud-based financial solutions. “We’re seeing flat to minor growth across our client base, with about 60% having improved profitability,” says Mike. “But that has come from a shift to focusing on profitability and slowing growth on purpose.”

He goes on to explain that those businesses are cutting burn and focusing on better unit economics rather than top-line expansion. The other 40%, Mike says, are experiencing exactly the squeeze our data shows: revenue up slightly, costs up just as much, margins under pressure.

On the payroll side, the pressure is severe. Brian Didsbury, a CPA and Director of Finance at LiveCA, is seeing it firsthand. A full-service accounting firm serving Canadian-owned SMBs in the $3–15M revenue range, LiveCA saw clients experience talent shortages in professional and technical roles in 2025 that drove compensation even higher than anticipated, on top of existing cost-of-living wage pressure. “Starting salaries are coming in above what companies expected,” Brian says, also mentioning a fairly flat year for clients. “And for certain roles in high demand, raises are running above cost-of-living adjustments just to retain people.” Add in increased demand for benefits like health spending accounts, and labour costs are climbing across the board.

The takeaway is clear: revenue growth alone isn’t enough. When costs climb almost as fast, margin discipline becomes the difference between growing profitably and just growing. Ignoring these shrinking margins means less cash to reinvest in tools and marketing or advertising, less cushion for a slow quarter and fewer options when growth opportunities do crop up.

The Bottom Line: Profitability Under Pressure

The margin squeeze showed up across Float’s customer base, with EBITDA declining 1.08% in 2025, even as revenue grew.

That disconnect tells a story. Businesses have raised prices to offset rising input costs and, in doing so, contributed to the broader inflationary environment. But they haven’t been able to pass along the full extent of those increases. The result is compressed margins and declining profitability, even for companies doing everything right on the top line.

Our spend data shows businesses exercising discipline where they can. Historically, spend on travel and meals has a marked increase in Q4 (generally about 24%). In 2025, that seasonal bump was just 15%. Companies are cutting these types of discretionary costs while maintaining operational investments, which is a sign they’re aware of the pressure but have limited room to maneuver.

Mike Pinkus at ConnectCPA confirmed this pattern. “The main cuts we’re seeing are headcount and SaaS spend, which is being monitored for the first time. Companies are now scrutinizing everything outside of their core tech stack to understand what they’re paying for and how these products are being used,” he says. “We are also seeing cuts to larger discretionary items like retreats, conferences and big team events.”

Our data reflects this nuance: the businesses driving that SaaS growth are doubling down on core tools and AI. The rest are trimming redundancies while keeping core tech stacks intact.The rest are trimming redundancies while keeping core tech stacks intact. The way they do that is with visibility, knowing exactly what’s being used, what’s not and where to cut without losing ground.

Canadian businesses are showing discipline. They’re cutting discretionary spend, scrutinizing SaaS and treating every hire like the investment it is. What separates those that protect profitability from those that watch it erode is visibility: knowing exactly where every dollar is going and whether it’s earning its keep. Without that clarity, cuts become guesswork. And guesswork in a margin-squeezed environment is the difference between canceling a retreat no one needed and cutting a tool your team depends on every day.

Cash is down, debt is flat and capital is harder to find

Float’s data shows the average cash balances for Canadian businesses declined 4.86% in 2025 while total debt stayed flat (0% change year over year).

Businesses are spending down reserves to support operations or growth while deliberately avoiding new leverage. In an uncertain economy, that caution makes sense. But it’s not the whole story.

Capital is also getting harder to secure. Credit conditions tightened significantly in 2024 and show no signs of easing, with collateral requirements surging 43% year over year, from 46% to 66% of borrowers, according to ISED; loan approval rates slipped from 91% to 89%; and access-to-capital concerns among small businesses hit 29%, well above the historical 22% average, as reported by the Canadian Federation of Independent Business (CFIB).

This isn’t new. Float’s own State of SMB Report in October 2024 found that 70% of new SMBs had difficulty accessing capital. Small business lending remained flat through the second half of 2024 and showed no signs of recovery going into 2025, according to ISED. Meanwhile, business insolvency levels remain 33% above pre-pandemic averages.

Mike Pinkus at ConnectCPA has seen the shift firsthand. “Overall debt appetite is down, but not because businesses don’t want it,” he says. “They’re actively having those conversations, but the terms are worsening, with tougher covenants, more personal guarantees. Some are outrageous. In the last year, the big five banks were giving covenants I’ve never seen in the last 15 years of doing this. And banks are calling loans faster when covenants get tripped.”

Brian Didsbury at LiveCA echoed the sentiment. “Debt uptake in 2025 was very low. The rates weren’t advantageous enough, at 5%, 6%, 7% and sometimes 8%,” he says. “Plus, requirements have gotten a lot stricter over the past few years: the financial ratios, the covenants, sometimes the collateral you actually need. Certain banks now require audited financial statements, which gets expensive. It can be $10,000, $20,000, sometimes upwards of $100,000. And time-consuming.” 

Access to capital has long been a structural challenge for Canadian businesses. Heading into 2026, when we see reserves shrinking and traditional lending tightening, businesses need maximum flexibility from their existing resources. They need to earn better returns on cash while maintaining liquidity, and find partners who can offer working capital without punishing terms. Not making those shifts could be the difference between taking on a major new client or turning them away because you can’t float the upfront costs. Between hiring the senior developer you need now or waiting six months to rebuild the cash cushion. Between jumping on a supplier discount for bulk ordering or watching the window close while you wait on a bank approval.

Float’s predictions for 2026: What the winning businesses will do differently

The businesses that pull ahead in 2026 won’t be the ones waiting for conditions to improve. They’ll be the ones treating every dollar, and every tool, like it has to earn its place.

That starts with SaaS. Our data showed software spend up 26% in 2025, but partner insights reveal a shift: for the first time, companies are actively scrutinizing what’s outside their core tech stack. Consolidation is coming. Duplication gets cut. And AI is speeding up those decisions. The tools that deliver measurable ROI will stay, while everything else is on the chopping block.

Brian Didsbury at LiveCA pointed to innovative professional services firms as the standout performers of 2025. “The ones that adopted AI—using it to show up in search results, to turn month-long research projects into days—they excelled,” he says. “They’re acquiring customers differently and delivering work faster. That combination is hard to compete with.” Finance leaders he’s spoken with are more optimistic about 2026 specifically because of the cost savings AI is starting to unlock.

Winners will also demand more from their financial partners. When margins are compressed and capital is expensive, every basis point matters. That means scrutinizing banking fees, renegotiating service costs and expecting better returns on cash reserves. “Conserve cash, protect margins, grow selectively.” That’s how Mike Pinkus at ConnectCPA describes the dominant mindset heading into 2026. Businesses operating with visibility, intention and appropriate discipline will have outsized results and help drive broader economic growth.

Discretionary spend will remain tight in 2026. The muted Q4 we saw in 2025, with travel and meals up just 15% versus a historical 24%, that isn’t a blip. Conferences, retreats and big team events will remain on the back burner until confidence returns.

But cutting alone won’t win. The businesses that gain ground will be the ones investing aggressively in marketing and customer acquisition, particularly those with pricing power who can maintain margins while competitors pull back. Simultaneously, they’ll be building the infrastructure for cash flow optimization: real-time financial visibility, smarter treasury management, and tools that maximize returns on reserves while minimizing capital costs. In 2026, that shifts from nice-to-have to competitive necessity.

On the flip side, businesses that maintain the status quo (waiting for rates to drop, tariff uncertainty to resolve, government incentives to kick in, etc.) will likely watch competitors pull ahead on efficiency gains they can’t recover.

Float’s bet on Canada

Canadian businesses are feeling the pinch in 2026. Capital is harder to access, terms are worse and the margin for error is shrinking. But constraint has a way of clarifying what really matters.

And what matters now is working capital that doesn’t come with punishing terms, cash reserves that don’t sit idle, and visibility sharp enough to act on, not just report from.

That’s exactly what Float has built and what we’re doubling down on in 2026. Charge cards that give businesses flexible access to working capital. High-interest accounts that put cash reserves to work. And expense management tools that deliver real-time control over spend before it happens.

The winners of 2026 won’t just cut costs. They’ll optimize how capital flows through their entire business. We’re betting on Canada. We’re backing the businesses ready to lead. And we’re here to ignite their full potential.

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Methodology

Float Financial Changes

• Total sample size was 919 Float customers.
• Data compares June 2025 to Dec 2025 for the same cohort of companies. Samples were removed if there were concerns with data quality.
• Financial data follows an exponential/power law distribution, comparing medians, not averages.

Float Spend Trends

• Total sample size was 2,071 customers and only those that had fully ramped on Float usage.
• This analysis compares customer spend across Q4 FY24, Q2 FY25, and Q4 FY25 within consistent customer cohorts.
• Spend trends were measured using aggregated card transactions, categorized at the merchant and spend category level.
• Percentages of businesses “notably increasing spend” represent customers whose category spend grew above a defined threshold relative to their own historical baseline.
• Customers with incomplete data, irregular usage patterns, or significant account changes (e.g., mergers, closures) during the period were excluded from the analysis.

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