Equifax Market Pulse: Addressing the Changing Landscape for Small Businesses

March 14, 2023

PANELISTS OFFERED INSIGHTS on how small businesses can channel simplified data and attributes to help solve complex challenges and achieve growth in the current economic environment on the February 2023 Market Pulse webinar, “Growth in an Uncertain Economy: Simplified Data and Attributes to Solve Complex Challenges.” During the presentation Amy Crews Cutts, President at AC Cutts & Associates, and Jesse Hardin, Senior Risk Advisor at Equifax, broke down key macroeconomic and consumer credit insights; and David Adams, Product Marketing Leader at Equifax, led a thought-provoking discussion with Patrick Reily, Co-Founder of Uplinq Financial Technologies, on the current commercial market. 


Setting the stage: Macroeconomic trends and the consumer credit landscape

Economic uncertainty, changing consumer behavior and continued supply chain disruptions are just a few of the issues that small businesses must navigate. During her examination of the macroeconomy, Amy Crews Cutts noted that while the global supply chain has improved significantly from a few years ago, it’s not back to normal. 

“If you’re in the business of making products or of selling products, getting ‘some’ of something isn’t going to help you when you need the whole thing. A car without a steering wheel is not a whole car,” Crews Cutts said. “And that speaks a lot to inflation as well, because people who need the parts and things that are in short supply are willing to bid up prices, so it’s a challenging environment.”

With respect to the national labor landscape, Crews Cutts remarked that the current employment market is very robust, though she predicted changes on the horizon. Job openings are still at historically high levels, but hire and quit numbers are beginning to trend downward, indicating a potential turning point in the employment market. 

One of the big takeaways during the webinar in relation to small businesses is the pure average annual number of small businesses in the U.S. year over year. “Before COVID, the average number of new business startups was right around 200,000 a month,” said David Adams, Product Marketing Leader at Equifax. “After COVID, there were a record 4.4 million new businesses started. In 2021,  that number went up to 5.4 million.” 


Understanding small business credit risks

Understanding the factors that contribute to small business success rates and credit risk is crucial for entrepreneurs and lenders alike. To mitigate credit risk, lenders typically look at a variety of factors, such as credit scores, payment histories, and debt-to-income ratios. Lenders also consider the business’s financial statements, cash flow projections, and overall creditworthiness. For small businesses, building and maintaining a good credit score is critical for obtaining financing and securing favorable loan terms. 

Compared to April 2020, the current small business spending index is up 52% as small businesses seek new funds to help grow their businesses and emerge from the pandemic. 

Age and size of a business are huge factors in determining the risk a small business is in in our current economy. As the life of the business goes on, the credit risk begins a downward slope over time so the risk is declining. Additionally, location is a key factor to success. The closer you are to a hospital, university, and grocery store, the higher of a success rate you will have compared to other small businesses.  

For more information on Equifax consumer credit trends and to register for future Market Pulse events, click here