Experian/Moody’s: Small Business Credit Conditions Decline
Experian said that the Experian/Moody’s Analytics Small Business Credit Index tumbled in Q4/12, falling 6.8 points to 97.3 from 104.1 in the previous quarter. This is the second consecutive quarterly decline and is the index’s lowest reading since Q3/11.
Findings from the report also show that small-business credit quality deteriorated considerably in the quarter, due to a rise in delinquent debt and a slowdown in personal income growth pulling retail sales lower and hurting small-business revenues.
“Small business credit quality weakened at the end of last year, as the Midwest drought, Superstorm Sandy and cuts in government spending weighed on the economy,” said Mark Zandi, chief economist at Moody’s Analytics.
“Small businesses continue to struggle to meet their financial obligations. However, it is encouraging that credit appears to be growing again for the first time since the recession. More freely flowing credit to small businesses should support more investment and hiring and reinforce the broader economic recovery,” he added.
Highlights from the report also show small firms were struggling to pay down delinquent debt. Balances less than 60 days past due rose nearly 20% in the quarter, overshadowing a slight decline in those considered severely delinquent (more than 90 days past due). Additionally, nearly all of the increase seen in delinquent debt is a result of firms falling behind on payments on which they were previously current.
“Paying down existing delinquent debt and ensuring future bills are paid on time are critical components to a business’s success,” said Allen Anderson, president of Experian’s Business Information Services. “High levels of delinquency can negatively impact a business’s credit, making it difficult to obtain favorable loan and other business terms, which are critical to a business’ success.”
For a copy of the full Experian/Moody’s Analytics Small Business Credit Index report click here.