COSTA MESA, Calif. (5/13/14)--The lingering effects of a harsh winter resulted in rising delinquencies and declining credit balances at small businesses, according to a report by Experian and Moody's Analytics.
The Experian/Moody's Analytics Small Business Credit Index found credit balances fell 1.2% in the first quarter.
"The improvement in small-business credit conditions paused early this year. However, this should prove temporary, as the broader economy revives from the severe winter weather," said Mark Zandi, chief economist, Moody's Analytics. "All the preconditions for stronger credit growth and fewer credit problems are in place, including sturdy profits and cash flow, record-low interest rates and low debt service burdens."
The delinquency rate ticked upward to 9.8% from 9.6%, which is its second consecutive quarterly increase. The change was seen across all buckets, though the most noticeable rise was in the 60- to 90-day range, indicating that small businesses have had trouble paying down balances only recently, according to the Experian report.
The drop-off in credit balances could be attributed to a combination of larger creditors limiting business-to-business credit transactions and small businesses being more reluctant to take on debt, said Joel Pruis, senior business consultant, Experian.
"As we move further away from the cold, wintry season, we should expect to see the growth rate for credit balances normalize as consumer spending picks up and small businesses feel more comfortable making credit-based purchases," Pruis added.