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Credit conditions for small business improving across the country

August 26, 2016

By Mike Brennan, courtesy of

A report released Thursday says current credit conditions for small businesses are improving across most of the United States, and overall small-business delinquencies decreased slightly from last quarter, with levels dropping at every stage of delinquency. The total bankruptcy rate fell as well, though at a slower pace than the previous year.

This news comes from the second quarter Experian/Moody’s Analytics Main Street Report.  

“Small-business owners have done a great job of managing their financial commitments and paying their bills on time over the past few quarters,” said Gavin Harding, senior business consultant for Experian. “This has led to an increased level of available capital, which could enable them to expand or invest in their business to grow their enterprise. It will be very interesting, however, to watch the current trends unfold throughout the rest of the year, as administration and potential policy changes — as well as the impact of Brexit and other global events — could affect U.S. business behavior.”

While current conditions ensure that small businesses have an abundance of available credit, the average utilization rate was down almost 22 percent from the same period in 2015. The report found that this decline is the result of a slight increase in credit limits and a steady increase in balances.

“Small businesses are doing well, and their near-term prospects are good,” said Mark Zandi, chief economist for Moody’s Analytics. “Delinquencies and bankruptcies are steadily declining, reflecting solid sales, low interest rates and generally light debt loads. The only blemish is for businesses in the still-struggling energy and related industries.”

Other highlights from the Q2 2016 report:

  • The mining industry experienced the sharpest increase in severe delinquencies and bankruptcies across all industries in the second quarter
  • The transportation and utility industries also experienced a decline, with the average severe delinquency rate increasing by 30 basis points during the quarter
  • Construction saw the strongest improvement, with severe delinquencies dropping by nearly one-third in the last year and a half
  • Construction bankruptcy remains high in West Virginia and New Mexico, however, with rates of 0.59 percent and 0.44 percent, respectively
  • Bankruptcy rates along the Eastern Seaboard tend to be below the national average

Key factors comprised by the Main Street Report include a combination of business credit data (credit balances, delinquency rates, utilization rates, etc.) and macroeconomic information (employment rates, income, retail sales, investments, etc.).

To download a copy of the Q2 2016 report, click here.

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