It seems like every conversation I have regarding how the U.S. economy is doing, I always think about small businesses. After all, small businesses are what drive our economy forward. They are the center of commerce for our country, and create the most jobs for our growing workforce. Quite honestly, without them, who knows where our country would stand today.
With that said, how are small businesses really doing?
Well, according to the Experian/Moody’s Analytics Small Business Credit Index, small businesses rounded out 2014 performing at a very high level, especially in terms of credit health. Small businesses improved their payment and credit management behavior across the board, increasing their average risk score, reducing the number of days they paid bills past due and lowering delinquency rates. The end of 2014 also saw a decrease in the number of businesses that filed for bankruptcy. Simply put, small businesses fared well at the end of last year.
What does this mean in the grand scheme of things?
For lenders and suppliers, the continued improvement in payment and credit management performance by small businesses is a welcomed sign. It enables them to feel more confident when extending credit. Understanding these trends give lenders the insight needed to make more informed decisions on loan terms, interest rates and credit limits.
On the other side of the spectrum, small businesses have positioned themselves to gain access to a wider availability of credit than several years ago. Staying on top of their payment performance will be critical, as it can open up the credit spigot for years to come. Gaining insight into how lenders and suppliers perceive a small business’s risk, enables owners to understand the areas they need to improve on.
At Experian, we’re committed to helping lenders, suppliers and small businesses alike, understand these data points, and turn them into actionable insights to help them move their businesses forward and grow. Enabling our clients to use this data for good and create new opportunities is at the core of everything we do.
At the end of the day, the continued improvement in small business credit health is a positive for all parties involved. It enables lenders to feel more confident that they will receive payment on loans they’ve extended, and small businesses will have access to capital that helps them grow and succeed. And when small businesses succeed, it has a very positive affect on our economy.