PayNet has developed the PayNet Small Business Default Index (SBDFI), an economic indicator designed to gauge small business defaults and signal insolvency across multiple sectors of the economy at the national, state and industry levels.
Default is a point-in-time measurement of borrowers that have failed to remain current and as such is a vital piece of information to assess risk exposure and evaluate the health of the overall economy.
Published on a monthly basis, the Small Business Default Index series will track businesses that default on financial obligations. Small businesses are defined as companies with less than $1 million in total debt – a population segment that represents more than 90% of all businesses. Defaults are measured by calculating the severely past due on payments on a substantial portion of debt outstanding. This Small Business Default Index is a series of 988 separate indices on a national, industry, state and state/industry basis.
“The perception among policymakers, lenders, regulators and the general public is that small businesses are high credit risk. SBDFI provides the facts with historical measures of defaults by geography and industry,” says William Phelan, president of PayNet. “Research shows SBDFI gives an advanced look at banking and financial distress up to 3 months faster than FDIC measures.”
The SBDFI is the latest addition to PayNet’s family of indices. In conjunction with PayNet’s Small Business Lending Index (SBLI), SBDFI will provide new depth for analyzing industry trends within states.