Business credit reporting agencies have unique access to information about the health of small businesses in America. They can monitor who’s borrowing, how much, and whether bills are being paid on time. And of course, they can track trends in this information. Some of this data is available to everyone, for free.
Experian, for example, recently launched its Business Benchmark Report, a new monthly look at how businesses are faring in the United States. The report contains four key indicators of business health, including commercial risk score, days beyond payment terms, percent of dollars delinquent and percent of dollars severely delinquent. Experian also drills down and looks at the size of the business, industry group and region.
You can use their online tool to delve into the trends that interest you. For example, you can see the average credit score for a particular industry, by employee size, then view the results state by state.
Here are a few recent findings from Experian:
- Businesses with more than 20 employees are decreasing the percent of delinquent dollars outstanding, whereas businesses with one to 19 employees are seeing a rise in delinquencies.
- Non-employer firms (those with no employees) have seen a decrease in the percent of delinquent dollars outstanding – with a more than 10 percent improvement over the last six months.
- Larger businesses (those with 250 employees) have a lower rate of severe delinquency when compared with all businesses. Only 2 percent of their dollars outstanding are considered severely delinquent (91 or more days), as opposed to the national average of 5 percent.
- Overall, retailers are struggling. Retail is among the industry groups with the lowest commercial credit scores, averaging 56.66, which is 6.6 percent below the national average.
Cortera also shares business payment data. It recently launched its Small Business Index (SBI) to track recovery for for small businesses – those with fewer than 500 employees. Their data, which has been sliced and diced in numerous charts and graphs on the Cortera blog, ultimately finds that small businesses are not enjoying the level of recovery of larger firms.
According to Cortera data, “small business still remain over 28% higher (paying bills later) than our October ’07 report numbers. Simply put, small businesses are still paying slower than big businesses in an effort to manage their cash flow.” Small businesses are 38% slower at paying their bills than big businesses.
This kind of data is important for small business owners for several reasons:
1. It reinforces the need for business owners and managers to check and monitor the credit ratings of their clients. This is critically important for smaller firms that could risk going under if a key client or customer doesn’t pay.
2. It illustrates the need to keep up with what’s going on in your industry and geographic region. If your industry’s credit scores have been dropping, for example, your firm may be “guilty by association.” If you are doing fine though your competitors aren’t, be sure you are proactive about letting your clients, lenders and vendors know that all is well. Having a strong business credit history to back up your claims can be critical.