Small businesses increased hiring for the holidays funded by credit while servicing their outstanding debts. The moderately delinquent balances for small businesses declined to 1.21 percent in the fourth quarter from 1.60 percent at the same time last year. Taxes are a rising issue for small businesses, but increasing concerns here did not dampen borrowing or hiring in the fourth quarter. The availability of credit has cushioned the blow of the pandemic for now and a third stimulus will help insulate small businesses from altered consumer spending patterns.

Join Craig Wilson, Senior Director of Experian Advisory Services and our credit union industry partners to discuss the top three issues effecting the credit union industry and share insights for using digital transformation to accelerate recovery during and following COVID-19.

In a fight for survival small businesses have turned to layoffs and borrowing as they attempt to reach the other side of COVID-19. Increasing borrowing is helping to mask rising late-stage delinquencies and bankruptcy. Layoffs and borrowing can only mask weakness for so long until a reckoning will arrive. A new round of government stimulus could mitigate this reckoning but doesn’t appear likely to arrive before year’s end. This will push more small businesses to again borrow for survival. When new borrowing is no longer a necessity delinquency and bankruptcies will rise.

Small businesses have turned to borrowing to survive periods of prolonged slumping sales, in many cases from government programs offering loan forgiveness. This increased borrowing has masked rising delinquent balances, but such a solution is a short-term fix. Small businesses will need to find ways to generate revenue to keep their credit current. Defaults are expected to rise in coming quarters as forbearance programs expire and as customers are likely to change their priorities in the wake of COVID-19.