April 9, 2018
By Bob Coleman
Editor, Main Street Monday
Main Street Monday — Small Business Delinquencies Edging Up
Says PayNet in their April 2018 small business lending report.
The Thomson Reuters / PayNet Small Business Delinquency Index (SBDI) 31–90 Days Past Due edged up to 1.39% in February and is up five basis points over the last 12 months. The SBDI 91–180 Days Past Due increased to 0.35% in February and is up one basis point compared to year-ago levels.
Small business delinquencies are clearly on the rise, likely reflecting both rising interest rates and a maturing business cycle. Given that the Federal Reserve is expected to raise interest rates 2-3 more times this year, delinquency levels may continue to slowly rise in the months ahead — though strong economic conditions make it unlikely that we will see a sharp increase in small business delinquencies in the near term.
Moreover, sustained economic growth could alleviate some of the strain on borrowers; according to the Federal Reserve, nearly 10% of lenders expect to see fewer delinquencies and charge-offs on C&I loans to small firms in 2018, compared to just 6% that expect to see more. As delinquencies rise, the ability of banks and other lenders to accurately assess credit risk will become even more important.