Cautious Optimism for Small Businesses

In this episode of the Market Pulse podcast, we discuss the latest round of PPP and small business credit and industry trends with Equifax senior data analyst, Sarah Briscoe. 

This transcription is edited for brevity. Listen to the full podcast for more great insights.

Theresa Freas: Top of everyone's mind is the second round of stimulus just came through. When we're talking about small business support, I believe it was $284 billion that was earmarked for PPP. How do you foresee that impacting the industry? And what did we learn from the first round that we should consider as we look to the impact after the second stimulus?

Sarah Briscoe: In the last round of stimulus, we saw a decrease in lighter delinquency [defined as accounts between 31-90 days delinquent], and we didn't really see a decrease in severe delinquency [accounts over 90 days past due] or in default -- sort of precursors to business closure. So I'm cautiously optimistic about the next level of stimulus, that perhaps it could save some businesses who may be on the cusp of becoming delinquent. But the amounts of aid that we're seeing, we didn't really see a decrease in business closures. So it's a cautious optimism, but I'm not sure how far it's going to go in terms of businesses who are severely struggling right now, if it will save those businesses at this time.

Theresa Freas: What trends are you seeing in severe delinquencies or the more mild delinquencies?

Sarah Briscoe: Right now, the 31 to 90 days past due rates are slightly up year over year. But they've flattened quite a bit since some of the sharp increases that we saw in the beginning of the pandemic, and then a sharp decrease of reopenings, accommodations extended and all of that. So the 30 looks closer to historical levels, although it's still a little bit elevated. Whereas with severe delinquency, think about something that's 91 plus days past due has sharply increased and has remained at a very elevated level. 

Theresa Freas: Do you see geographic patterns, whether in delinquency or lending trends?

Sarah Briscoe: At this time, the southwest has really started to stand out as a place that has seen a lot of high stress. Some of the highest stress in the country. Actually in December, Arizona showed the highest 91 to 180 day delinquency rate in the whole country, and it was over double what we saw a year ago for that state. New Mexico is the fourth highest. Nevada and California are both in the top 10. And a lot of this is driven by the huge impact of retail in these spaces. So it's a lot about what type of economy the state has and how it has been affected by drops in tourism, drops in business travel and conferences drying up. 

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RESOURCES mentioned in this podcast:

This index measures the percentage of loans that are 31-90, 91-180 and 31-180 days delinquent based on the largest commercial and industrial lenders in PayNet's U.S. database, including both loans and leases.