Loan Defaults and Delinquencies Hit Ten Year Highs Says Equifax
Main Street Monday — Loan Defaults and Delinquencies Hit Ten Year Highs Says Equifax
By Bob Coleman
Publisher
Equifax is known for its consumer reporting, but it also excels in tracking small business loan default statistics.
Equifax’s Small Business Lending Index (Loan Supply) has decreased by nearly 4% year-over-year, reflecting tighter lending conditions and subdued demand for commercial and industrial loans.
However, the expectation is that this decline will likely be offset by the anticipated “multiple” rate cuts by the end of the year.
Small Business Delinquency and Default Indices
Loan Delinquency Stats
The small business default index has reached its highest level in 10 years at 3.34%.
Delinquencies ranging from 31 to 90 days stand at 1.79%,
Delinquencies exceeding 90 days have hit a 10-year high of 0.65%.
The two greatest challenges facing small business
Labor quality and labor cost, in part due to Rising insurance costs.
For small businesses who have been struggling to hire and keep wages competitive, a softening labor market may be a positive development. Per the NFIB, 38% of small business owners reported job openings that they could not fill in July, an improvement from two years ago but still above most pre-pandemic readings. Labor cost or labor quality are the top concern for nearly one-third of small business owners, so a softer labor market should help to alleviate these issues — indeed, just 18% of small businesses are planning to increase wages over the next few months, the lowest level since April 2021. Labor costs are driven by more than just higher wages, however: rising insurance costs continue to be a headwind for Main Street. According to the WSJ/Vistage Small Business CEO Survey, around half of small businesses reported a 10+% increase in health insurance costs, with some reporting increases of 25% or more. While a less restrictive labor market should reduce upward pressure on wage growth, rising insurance costs appear to be offsetting much of the savings — and, potentially, reducing hiring capacity, at least on the margins.