Small Business Lending Continued Increasing in February 2024
THE EQUIFAX FEBRUARY SMALL BUSINESS LENDING INDEX (SBLI) showed that nominal small business lending improved by 7.9% month-over-month and 3.6% year-over-year. The SBLI three-month moving average increased slightly month-over-month by 1.2% and increased 3.3% year-over-year.
Meanwhile, the Equifax Small Business Delinquency Index (SBDI) 31-90 Days Past Due dropped 4 bps to 1.69% in February 2024. The SBDI 91–180 Days Past Due rose 1 bps month-over-month to 0.63%. Defaults rose to 3.18%, up 7 basis points month-over-month.
The U.S. economy appears to be on track for a soft landing. The labor market remains robust, inflation-adjusted wage growth is healthy, and consumer demand rebounded after a soft start to the year. Progress on inflation appears to have stalled, however, which remains a key factor to watch for Main Street.
Regional Analysis
Small Business Lending:
Compared to February 2023, annualized lending volumes were up in 37 states, including nine of the 10 largest states. Of those ten, only Texas decreased slightly month over month, while Illinois and Michigan showed gains of over 4%. Vermont (+18%) and Maine(+26%) had the greatest overall growth from last year.
Month-over-month, 34 states showed increased lending activity. Maine and Vermont showed the largest gains, while Northern states such as North Dakota and Montana had small decreases. Of the ten largest states, only New York had a small month over month decrease, while Illinois and Georgia had roughly +1% gains.
Small Business Delinquency and Default:
Defaults increased in every state annually and in 41 states month-over-month. The average increase in default rates by state was 45% and the pace of increase seems to be slowing. South Carolina had the smallest increase over last year at 11%, while Tennessee had the largest increase at 74%. Georgia, Florida, and Texas have the highest overall default rates amongst all states, with each above 4%. North Dakota, Minnesota, and Pennsylvania have the lowest, each with 2% or lower annualized default rates. Of the ten largest states, only Pennsylvania and North Carolina showed small month-over-month decreases in default rates, while Michigan had the largest increase at 16%.
In 31-90 day delinquency, 30 states (including seven of the 10 largest states) had an increase in delinquency month-over-month. Additionally, 42 states increased their delinquency rates from last year (including 9 of the 10 largest states) with the average increase reaching 38 bps. Florida (3.3%), Connecticut (3.1%), and Georgia (2.8%) have the highest delinquency rates in February 2024, while South Dakota (0.6%) and North Dakota (0.7%) have the lowest. Connecticut showed the largest annual increase in delinquency, rising 167 bps since last February.
Industry Analysis
Small Business Lending:
In February 2024, small business lending held steady or rose on a monthly basis in 14 of the 17 tracked industries, led by Health Care and Social Assistance; Construction; and Arts, Entertainment and Recreation, all growing by 1%.
Lending activity weakened on a monthly basis in only three of the 17 tracked industries, led by Mining, Quarrying, and Oil and Gas Extraction (-2%); Real Estate and Rental and Leasing (-1%); and Wholesale Trade (-1%).
Compared to February 2023, lending held steady or rose in 11 of the 17 tracked industries, most notably in Health Care and Social Assistance (+19%); Educational Services (+15%); and Arts, Entertainment and Recreation (+14%). In contrast, lending fell most in Mining, Quarrying, and Oil and Gas Extraction (-14%).
Small Business Delinquency and Default:
In February 2024, the annualized Small Business Default Index rose in 12 of the 17 tracked industries vs. January 2024, rising most in Educational Services (+9%) and Real Estate and Rental and Leasing (+7%) industries.
On an annual basis, from February 2023 to February 2024, the Small Business Default Index increased in all 17 tracked industries, led by a triple-digit increase (+124%) in Transportation and Warehousing. Arts, Entertainment, and Recreation (+71%) and Mining, Quarrying, and Oil and Gas Extraction (+66%).
On an annual basis, the 31-90 day Small Business Delinquency Index rose in all tracked industries vs. February 2023, rising most in Transportation (+45%).
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. To learn more and view the latest reports, check out our Small Business Indices page.