Small-Business Credit Quality Slides Going into Early 2013

Despite hope of clarity-based improvement after the election and avoidance of the fiscal cliff (albeit temporarily), the credit quality of U.S. small businesses decreased in a troubling, considerable fashion in 2012’s final quarter. Analysts in a new study report that the bad news can’t be hung on the easy scapegoat, Hurricane Sandy.

The Experian/Moody’s Analytics Small Business Credit Index noted that improvement in small business’ aggregate credit quality is expected to rise by late this year or early 2014. However, that is a part of the scant good news in the index, which declined 6.8 points to land at a historically low level of 97.3. The authors noted that reduced personal income growth drove a domino effect of lower retail sales, more cautious interest in investment on the part of the businesses and, in an increasing number of cases, borrowing to cover payroll expenses. It all adds up to smaller outfits having problems paying down credit obligations. The study noted:

“Balances less than 60 days overdue rose nearly 20% on the quarter…this was enough to push the share of delinquent dollars higher, to 9.7% from 9.4% in the third quarter...Nearly all of the climb is the result of firms that previously had been current on their payments falling behind.”

The study also dispelled the notion that a driver of the poor results could be tied to the recent storm, noting Sandy had very little real impact on statistics for the quarter.

- Brian Shappell, CBA, NACM staff writer

For more on this study, view this week's edition of NACM's eNews, available Thursday afternoon. Watch your inbox for the email link, or go directly to the eNews page at

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