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Moody's: Small Business Credit Improving

profit, organic foods Credit: Money image via Shutterstock

Despite fears over rising taxes and the implementation of “Obamacare,” small businesses have been finding it easier to pay off their loans and qualify for new credit, new data shows.

The findings, revealed in the latest Experian/Moody’s Analytics Small Business Credit Index, show how business credit fared during the first quarter of this year.

Small business credit quality improved markedly in the first quarter, counter to expectations for no change or a slight decline, the report said.

[How to Apply for a Small Business Loan]

Small businesses have continued to pay off their past-due loan balances while also growing their payroll, the report found. However, the nation’s smallest businesses — those with five or fewer employees — have seen their delinquent-loan balances rise.

The overall improvement in loan repayment, combined with stronger consumer spending, has helped improve the availability of credit to small businesses.

“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.”

The report also found that companies were faring much better in cities west of the Mississippi — driven, in part, by a resurging housing market in those regions. However, Eastern cities have been more directly affected by cuts in government spending and the poor performance of Europe’s economies, the report found.

Regionally, delinquency rates for small businesses in Houston, Phoenix and San Diego were significantly lower than the U.S. rate in the first quarter, whereas the delinquency rates in several major Eastern cities were more than double the national average. At the state level, delinquency rates in Arizona, Utah, Colorado, Wyoming and Idaho were significantly lower than the U.S. average.

Jeanette Mulvey

Jeanette has been writing about business for more than 20 years. She has written about every kind of entrepreneur from hardware store owners to fashion designers. Previously she was a manager of internal communications for Home Depot. Her journalism career began in local newspapers. She has a degree in American Studies from Rutgers University. Follow her on Twitter @jeanettebnd.