The improving economy is likely leading many small business owners nationwide to consider expansion, and many might need to rely upon lending solutions from financial institutions to accomplish these newfound goals. Fortunately, it seems lenders are once again rising to meet that potential need.
The Small Business Credit Index rose 4.7 points in the first three months of the year to a total of 109, an increase from the previous quarter's upwardly-revised rating of 104.3, and more in line with the levels seen in the third quarter of 2012, according to the latest data from the credit monitoring bureau Experian and Moody's Analytics. Much of that improvement came because small business owners are now getting a better handle on their finances and decreasing the rates at which they fall behind on their loan payments, and because consumer spending has continued to rise in the early part of the year.
"Small business credit conditions are improving, but only slowly and unevenly across the country," said Mark Zandi, chief economist at Moody's Analytics. "Much further progress this year will be difficult given the likely fallout from sizable tax increases and government spending cuts, but conditions are expected to improve next year once these fiscal headwinds begin to fade."
With respect to the unevenness, it seems that most of the improving credit conditions have come in the Western part of the country, thanks in large part to the home prices there rising more quickly than they are on the East Coast, the report said. Delinquency rates were at their lowest points for small businesses in Houston, Phoenix, and San Diego, well below the average nationwide rates, while major cities in the East saw theirs come in at more than double the national average. Similarly, on a state-by-state basis, the lowest delinquency was observed in Arizona, Utah, Colorado, Wyoming, and Idaho.
Small business owners in all parts of the country should carefully assess how their businesses are going and their local economies are improving before they make any firm decisions about taking out more credit. They may need to assess their small business insurance needs before they commit to expanding, as doing so might increase their needs for workers' compensation or general liability insurance.