January 17, 2023
SBA Hot Topic Tuesday – Southern States See Higher Delinquency and Default Rates
Overall, small business conditions are better in northern states while southern states tend to have less positive small business conditions according to PayNet’s market insights. Default rates in the United States improved while delinquencies and small business lending worsened at the end of 2022.
Here are the facts from PayNet’s indices:
Small Business Lending Index
• The volume of new leases and commercial loans decreased by 1%.
• Small business lending activity was the lowest in Minnesota and Washington D.C. towards the end of 2022.
• Montana, North Dakota, and Nebraska had the highest small business investment in their states compared to other states in the country.
Small Business Delinquency Index
• The percent of loans that are more than 30 days past due but less than 91 days past due is 1.39%, a slight increase.
• Delinquencies are highest in Washington D.C. (4.85%), Georgia (2.16%), Florida (2.14%), and Arkansas (2.13%).
• The lowest delinquency rates are in Alaska (0.64%), Vermont (0.77%), Maine (0.86%), and Minnesota (0.87%).
Small Business Default Index
• The percentage of loans and leases that defaulted in the last 12 months is 2.01%, a slight decrease.
• The default rate is lowest in North Dakota at 1% of loans, Minnesota at 1.09% of loans, and Alaska at 1.26% of loans.
• The highest default rates can be seen in Florida (2.69%), Georgia (2.65%), and Louisiana (2.51%).
• On average, southern states have a higher risk of defaulting while northern states have a lower risk of default.
• The forecasted commercial loan default rate increased with 2.41% of loans predicted to default at the end of the following four quarters.
• North Dakota, South Dakota, Minnesota, Wisconsin, and Iowa are forecasted to have the lowest default rates in a year.
• Georgia, Texas, and Florida are expected to have the highest default rates at the end of the next four quarters with loan default rates ranging from 2.75% to 2.81%.