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Tale of two recoveries – big business leverages its position while small business struggles

May 18, 2011 by Dan Meder

An interesting dynamic is playing out as the economy begins to get legs. For example, when you look at the payment behavior of U.S. businesses, there’s a difference in big business trade payments vs. small business. Our Experian Business Benchmark report shows large businesses are delinquent at a much higher rate. However,when it comes to severely delinquent payment, small businesses pay beyond 90 days significantly more often than large businesses.

What does this mean? Big businesses are leveraging their positions, while small businesses can’t. Big business balance sheets are flush with cash. They are using “supplier financing” in the form of extending payments, but not to the point of severe delinquency. Small businesses, however, need to stay current to ensure a flow of inventory. Unfortunately, banks reluctance to lend, big business essentially extracting free working capital loans from small business suppliers in the form of extended payments, and suppliers unwillingness to accept slow payments from small businesses can become a slippery slope. Since small business growth is crucial to the recovery, it may be time to start loosening the reins in order for them to have the funding they need to continue.

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