Small businesses continue to meet new challenges head on

Small business faced significant challenges in third quarter

Posted on 11/17/12 10:01:00 AM

According to Experian, one of the leading global information services companies, there was an increase in severely delinquent account balances and slower consumer spending growth in the third quarter of the year, which caused problems for businesses across the country.

The challenges faced by the business sector around the country is expected to continue for the remainder of 2012 and most of 2013, causing problem for companies who are looking to make improvements to the company's sales.

"Small businesses remain under financial pressure, as the broader economy continues to grow slowly and concerns about the nation's daunting fiscal challenges mount," said Mark Zandi, chief economist at Moody's Analytics. "Businesses are reluctant to take on new credit, and severely delinquent credit remains uncomfortably high. It is encouraging, however, that early-stage delinquency is declining and that credit scores are holding up."

Zandi added that credit conditions should improve if President Barack Obama and Congress come to a consensus on the fiscal problems that are facing the country.

"Having a high level of severe delinquency is as troubling for a small business as it is for a consumer," said Allen Anderson, president of Experian's Business Information Services. "Making timely payments and reducing delinquent debt are critical to improving a business's credit profile, making it possible for the business to achieve positive growth. When continually faced with a large amount of debt, businesses can be forced to make the same tough decisions that consumers do, except these decisions can impact others in terms of employment or salary adjustments."

According to the recently released Experian/Moody's Analytics Small Business Credit Index, which is the credit quality measured by the Small Business Credit Index, credit began to deteriorate in the third quarter of the year after showing positive numbers for four consecutive quarters.

The report showed that while 30- and 60-day past-due balances have shown signs of improvement, the balances that are considered to be severely delinquent, which includes those that are more than 90 days delinquent, have not improved after increasing 11.4 percent over the first three quarter of last year.

With the holidays quickly approaching, more Americans are expected to spend money on presents for family members, even dipping into their basic savings accounts to pay for items. Considering the expected growth in consumer spending, business should show more positive numbers in the fourth quarter.