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Small business credit conditions remain positive in Q2

August 30, 2018 by Gary Stockton

Experian has released the latest insights on small business credit conditions with the Q2 2018 Experian/Moody's Analytics Main Street Report. The  report brings deep insight into the overall financial well-being of the small-business landscape, as well as providing commentary around what certain trends mean for credit grantors and the small-business community. 

View our interactive report

Small business credit performance remains strong

According to Moody's Analytics economists, the overall outlook for small-business credit is positive. Outstanding balances rose in the second quarter, as did the average balance per business. Delinquency rates continued the downward trend they have maintained through the expansion, and default rates stabilized at the level they reached last quarter. Continuing strength in the economy will keep small-business credit performance strong through the end of the current expansion, if not longer. 

Risks from rising rates and trade policy warrant scrutiny

Rising rates and destabilizing trade policy are potential sources of trouble up ahead, but thus far they haven’t slowed down small-business credit growth. If trade tensions escalate far enough, they could affect the labor market and incomes. The bouts of volatility in financial markets this summer are attributable to trade actions that could be aggravated by the imposition of additional tariffs or other actions limiting trade. 

Small-business owners who use personal sources to finance their businesses could be disinclined to invest if markets are unsettled. Additionally, if employers begin laying off workers under an aggravated trade scenario, this could dampen the positive labor market outcomes, which are starting to result in faster rising wages, thereby reducing demand from consumers.

More likely than not, trade will remain a small fish in the pool of risks to credit, but it’s a risk that bears watching, especially given heightened trade tensions.

You can read more by downloading the latest report from our website.

 

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