SMALL BUSINESS LENDING ROSE for the second consecutive month in
February, according to the latest Equifax
Small Business Indices, despite ongoing economic headwinds, Main
Street remains resilient. The Small Business Lending Index (SBLI) rose
9.3 points (+6.4%) to 154.8, which is up 5.3% year-over-year;
similarly, the SBLI three-month moving average ticked up 3.9 points to
143.8, now 1.9% above its year-ago level.
“Consumer demand has been healthy so far this year, and
although consumer spending cooled a bit in February, the most recent
Equifax SBLI data suggests small business owners continue to seek
out new capital,” said Bill Phelan, Senior Vice President and
General Manager at Equifax Commercial.
However, recent events in the banking industry may
potentially create changes on the horizon. The rapid rise in
interest rates has weakened bank balance sheets and placed pressure
on rate-sensitive depositors. In addition, financial institutions
are facing renewed scrutiny from account holders, policymakers and
regulators. As a result, lenders may desire to proceed with more
caution when considering new loans, and small businesses are
typically among the first to feel the effects of a credit tightening
cycle. Moving into next month, it’s more likely the data will show a
pullback in small business lending to account for increased risk sensitivity.
The same economic pressures are likely contributing to a
slow increase in the Equifax Small Business Delinquency Index
(SBDI). The SBDI 31-90 Days Past Due increased four basis points in
February to 1.48%, which was 24 basis points above its year-ago
level. Delinquencies rose in five of the six tracked industries, led
by a sharp increase in Transportation (+13bp M/M and +123bp Y/Y). On
the flip side, Agriculture showed a two basis point decline in
month-over-month delinquencies. February data also showed a rise in
delinquencies in nine of the ten largest states, led by Georgia (+15bp M/M).
The Small Business Default Index (SBDFI) showed similar
increases. In line with its increase in delinquency rates, the state
of Georgia saw a 17 point basis point month-over-month increase in
defaults, though Illinois experienced the largest increase overall
at 20 basis points month-over-month. New York was the only large
state in which the default rate was below its year-ago level. From
an industry standpoint, Transportation also saw the largest annual
default increase along with Finance at +147bp Y/Y and +99bp Y/Y, respectively.
“Inflation remains a concern for a plurality of small
businesses, but by historical standards, Equifax data indicate that
small business financial stress remains low,” continued Phelan.
“Should economic growth stagnate or recede later this year, small
business financial stress might rise more quickly, but for now,
portfolios appear to be in relatively good shape.”
About the Small Business Indices:
Produced monthly, the Small Business Indices help lenders
and businesses track changes in the small business marketplace by
providing insights into lending, default and delinquency trends.
These reports provide considerable value and insights, including:
Potential signs of future economic growth or
decline, demand for capital, and business fixed investment
across multiple sectors of the economy.
An early signal of changes in Growth Domestic Product
A snapshot of the future to help
determine changes in corporate policies or approval criteria
when bringing on new business.