The beginning of each month marks the release of a variety of economic reports that address the health of small businesses and the U.S. economy as a whole. This month’s reports indicate good news for the small business sector, suggesting that improved access to capital may be having an impact on employment and growth. From the reports, all published the first week of June, three findings stand out:
- Small business lending continues to increase
- Small business delinquency remains stagnant
- Employment is increasing
It is possible that increased access to loans for small businesses may be helping fuel the employment boom, as some of those funds could be used to create new jobs to help foster growth. The May ADP National Employment Report supports this, indicating that the jobs created by small businesses more than double large and midsized businesses combined.
Small Business Lending Continues to Increase
The Thomson Reuters/Paynet report uses the Small Business Lending Index (SBLI), an absolute number that measures the volume of loans to Small Businesses normalized to a base year – 2005. In May, the SBLI saw another major increase from the month previous, rising to 142, the highest recorded SBLI to date. To give some perspective, six years ago the index was at 65. This means small businesses are borrowing more than double what they were just half a decade ago. That’s a whopping 100 percent increase, and evidence indicates that the trend will continue in years to come. On the one hand, borrowing and lending money can help stimulate the economy, but increased lending & borrowing can also lead to increased risk. As small business lending and borrowing increases, the importance of having superior business credit can rise as well.
Delinquency on Loans Level
Reuters also released their small business delinquency index (SBDI) report, designed to gauge small business financial stress and default risk at a national level. At values of 1.25 percent and 0.3 percent respectively of businesses that were 31-90 days past due and 91-180 days past due on their small business loans, these indexes remained relatively level in recent years. This may be better news for small businesses, as the low risk factors, coupled with increased lending, could be more evidence of growth.
The Health of Small Businesses Slightly Lower Than Previous Months
Dun & Bradstreet also released their monthly report June 1, a multi-dimensional review of the health of the U.S. economy. According to the report, the small business health index inched down, along with three other findings:
- Payment delinquency decreased by 10.5 percent
- Credit card delinquency decreased by 2.7 percent
- Credit card use decreased by 4.1 percent
These decreases in delinquency may signal that more businesses are paying their loans on time and in full. This can be encouraging for businesses looking to partner with a smaller business, but are unsure about its stability compared to a larger potential partner.
More Job Opportunities Available
ADP’s monthly National Employment Report was released this week, and with it comes potential good news for the state of employment in the U.S. Roughly 201,000 new non-farm jobs were added to U.S. payrolls in May 2015. The business services segment continued to lead in employment gains, while construction is making significant contributions for a second straight month. To break down employment by business size, small business saw an employment increase of 122,000, midsize business by 65,000, and large business by 13,000. As far as jobs in general, April brought with it 5.4 million job openings – the most in 15 years; this according to CNN Money’s recent article, published June 9. The current surge of openings can be seen as another sign that the economy seems to be rebounding and the winter slowdown was temporary. As employment appears to increase and access to capital seems to grow, having a favorable business credit profile can be more important. The credibility that can come from positive business credit scores and ratings can help some businesses compete for loans and contracts.
If you’re a business owner, hopefully you’re seeing the positive impacts reflected in these recent studies. The increase in lending and stability in delinquency can indicate good omens for those in the industry, and increased employment can also indicate positive growth. Some businesses that have been eager to add additional employees, expand offices, or buy additional equipment, have been turned down for loans that were expected to fund these activities. In some cases, their business credit profiles might be the culprit. Checking your D&B business credit file, and working to impact your D&B scores and ratings could help you improve your ability to secure a bank loan. If you’re curious to what your scores and rankings are, check out Credit Monitor™. Regardless of how you choose to handle your business credit or whether or not you feel like your business is ready for growth, if you’re a small business owner, it appears that things are looking up.
Photo Credit: Ken Teegardin, flickr.com