C-Suite Wednesday — Small Business Default Rates Predicted to Rise
March 22, 2017
By Bob Coleman
Editor, C-Suite Wednesday
C-Suite Wednesday — Small Business Default Rates Predicted to Rise
Says the Thomson/Reuters Paynet Small Business Credit Outlook Report.
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The macro-economic picture points to accelerating business activity within a more stimulative environment.
We have witnessed a strong advance in the stock market, usually a reliable leading indicator. The Federal Reserve lifted its key Federal Funds Rate in December, and appears to be planning at least one or two more hikes this year.
We forecast that default rates will rise in 2017 due to:
- More recent and frequent loan delinquencies.
- Rising credit risk in major industry sectors.
- A brisk economy and rising interest rates, which tend to favor more risk taking.
We expect the small-business default rate to climb to 2.1% in 2017 from 1.8% last year.
While this is not the direction we would prefer to see, the uptick is moderate and marks a return to traditional small-business credit conditions after the all-time lows of recent years.
Even this year’s expected 2.1% default rate remains well below the 2.5% that we typically consider normal.
