Small-Business Credit Continues to Improve as Delinquency Rates Fall

Small-Business Credit Quality Continues to Improve as Delinquency Rates Fall

small-business credit quality continues to improve as credit balances rise and delinquency rates fall

small-business credit quality continues to improve as credit balances rise and delinquency rates fallExperian, the leading global information services company, today announced that due to a rise in credit balances and a decrease in delinquency rates, small-business credit quality continued to show significant improvement in Q3 2013.

According to the most recent Experian/Moody’s Analytics report, the Small Business Credit Index rose 2.3 points to 118.5, up from 116.2 the previous quarter. This notes the index’s third consecutive quarterly improvement, and its second consecutive record-breaking mark.

“Small businesses are getting their finances in order. Lower delinquency and stronger credit growth bode well,” said Mark Zandi, chief economist at Moody’s Analytics. “It won’t be a straight line up for small businesses, and the recent government shutdown hurt, but their prospects are improving.”

Highlights from the report show that credit growth is strong and is growing at a near double-digit level. While total outstanding balances have risen at their fastest rate in two years, delinquency rates have fallen at a consistent pace. In Q3 2013, only 10 percent (the smallest percentage since the recovery began) of outstanding small-business credit balances were past due, down 0.7 percent since Q3 2012.

“For the last year, we’ve seen significant improvements in small-business credit conditions. The reduction in past outstanding balances and improved payment performance by small businesses has provided them with the ability to increase credit balances in the third quarter,” said Joel Pruis, Experian’s senior business consultant.

“Moving forward, it is imperative that small businesses maintain the discipline demonstrated over the past several quarters. The ability to build and maintain a strong credit profile will help them obtain the appropriate funding to uncover new growth opportunities.”

From a regional perspective, the report shows that small businesses in the West continued to have stronger credit profiles than their Eastern counterparts. For example, small businesses in Utah displayed strong credit performances, as past-due balances for businesses comprise a mere 1.1 percent of their total balances. Conversely, small businesses in Florida have shown the weakest credit performance, as nearly 25 percent of all balances are paid beyond contracted terms.