Credit utilization rates have expanded briskly in the first quarter to reveal a strong small business market with favorable credit conditions

Orlando, Fla., May 10, 2017 — Small business conditions were on the upswing at the start of 2017, per the Experian/Moody’s Analytics Main Street Report. The detailed analysis, which will be presented at Experian’s Vision Conference today, shows that businesses are reporting healthy sales, and are investing and hiring strongly. Their finances are also improving, as fewer businesses are having difficulty paying their bills on time.

Small businesses, in the first quarter of 2017, demonstrated a decline in early delinquencies (less than 30 days past due) and severe delinquencies (more than 90 days past due). Businesses also showed high single-digit gains in credit balances (up 8.8 percent) driven by strong credit utilization rates, while credit limits increased by 4.5 percent. 

The strong performance by the small-business market can be attributed, in part, to an increase in consumer confidence. Due to a near-full employment rate and increased incomes, consumers are generating an increased demand for goods and services provided by small companies. This has caused the utilization of credit among small businesses to increase. 

“The market performance data and insights on trends help our small businesses and lenders make more informed decisions,” said Gavin Harding, senior business consultant for Experian. “So while we see that delinquencies are declining and credit limits and utilization rates among small-businesses owners are increasing, we also understand that small businesses don’t have adequate credit to expand at their desired pace. If economic conditions continue to improve this year, we should see financial institutions start to increase credit availability for small-business owners.”

While credit performance for small businesses across most industry groups showed improvement in the first quarter, the agriculture industry has remained surprisingly resilient despite four years of declining income for farmers. Performance in the manufacturing, transportation and public administration industries, however, was not as strong. Additionally, while the retail industry has seen improvements over the last two years, the segment continues to have the highest severe delinquency rates. 

“Small businesses are very upbeat, as they should be given their improving financial condition,” said Mark Zandi, chief economist for Moody’s Analytics. “They are borrowing more and paying their obligations back on time. If small businesses continue to do well, so too will the broader economy.”

Other sections in the Q1 2017 report include a detailed analysis of:
• Small-business risk assessment strategies.
• States ranked by their rate of severe delinquency.
• Potential impacts from policy changes.
• Credit quality in different industries.
• A forecasted outlook for the coming months.

The full results of the report, as well as additional data and insights on small-business health, will be presented in a webinar on June 13 at 10 a.m. Pacific/1 p.m. Eastern. To register for the event or for more information, visit http://www.experian.com/business-information/landing/qbcr-q1-2017.html