Small businesses looking for a loan may be in luck, according to the Experian/Moody’s Analytics Small Business Credit Index. The credit climate index reading for the fourth quarter of 2013 rose 1.2 points to 117 points. This marks the highest reading since Experian and Moody’s began tracking small business credit conditions in 2011. “The ability to gain access to funding and resources when needed is critical to the growth and success of any small business,” said Experian senior business consultant Joel Prius. “The trends seen in Q4 are a good sign for the economy because as more credit options become available to small businesses, the better their chances are to weather the short-term challenges they may face.” Delinquencies are also on the rise, though, with delinquency rates increasing 0.1% to 10.2% in the fourth quarter. Prius says the slight uptick is worth keeping an eye on. “Creditors need to be cautious and watch ... these rates. As we changed underwriting criteria, can the rates stay at 10.1% or 10.2%? Or will they start to increase? Then we need to tighten up a bit,” says Prius. The survey finds that some regions of the country are more financially healthy than others. According to the report, small businesses in the West are more likely to pay off loan balances on time than their Eastern counterparts. More specifically, the report says that businesses in Utah and Wyoming have a much lower delinquency rate: Only 1.1% of Utah businesses are paying their balances late. Looking ahead, Prius says it will be important for lenders to maintain their underwriting standards as loan applications improve. He notes that there is greater volume of loan applications in the West and yet lower approval percentages, which is a positive sign. “As we see the economy improve in different regions and the application volume starts to increase, it’s important that lenders don’t try to maintain their historical approval percentages,” says Prius.
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