More small business owners are paying their bills on time, as the Experian and Moody Analytic’s Small Business Credit Index hit a record high during the second quarter.
Maintaining a good business credit score can be essential for most small businesses because it helps them secure financing to keep their operations running or ensures they receive inventory at the lowest possible price. That’s why it’s great to see more business owners are making more timely payments on credit accounts.
“The report, or index, describes the health of the small business segment,” Joel Pruis of Experian, told Forbes. “We use our Experian credit data and partner with Moody’s macroeconomic data to provide a perspective of how well small businesses are paying today. We can also forecast how well small businesses will be able to pay their obligations in the future.”
Pruis added there has been a nice progression in improving conditions and performance of small businesses seen throughout the country.
Here are some notable data points from the index:
- There were 277,000 jobs added to the economy during each month of the second quarter, up from 190,000 during the first quarter.
- The delinquency rate dropped to 9.3 percent during the second quarter, down from 9.7 percent in the first quarter.
- Bankruptcies improved 12 percent during the second quarter compared to the year before.
“We saw a significant increase in what we classify as a generic risk score for Experian,” Pruis told the news source. “It indicates improving payment performance. And as a result, we are predicting improving future payment performance based upon the risk score we have.”
The advantage of a good score
Small business owners are likely aware of the benefits of maintaining a good personal credit score, like helping them qualify for a home or car loan, but business credit is different. While having a good business credit score will help with securing financing, like with personal credit, there are other advantages.
Having a good business credit score means suppliers will be more likely to give business owners favorable purchasing options. If their credit score is low, a supplier could require them to pay cash or find other ways to guarantee the purchase.
Additionally, certain companies will only conduct business with another company if that company meets a threshold for their credit scores. Therefore, for small business owners to get what could be a big contract, they’ll need a good credit score.