NEW YORK (AP) — Small businesses had a harder time paying their bills in the fourth quarter as consumer spending was sluggish and owners were uncertain about federal budget, according to a report released Wednesday.
Experian and Moody's Analytics said revenue fell at small businesses, leaving them with less cash to pay their bills. That led to an increase in the number of companies that were delinquent in their payments.
The Experian/Moody's Analytics Small Business Credit Index fell 6.8 points to 97.3. That was the second straight drop and the lowest reading from data that goes back to the fourth quarter of 2009. The index measures the total volume of companies' outstanding credit balances, their delinquency rates and economic indicators including employment, personal income, retail sales, consumer spending, gross domestic product and industrial production.
Delinquency rates rose to 9.7 percent of outstanding credit balances from 9.4 percent in the third quarter. Balances that are less than 60 days late rose nearly 20 percent. Nearly all of the increase was from companies that previously were paying their bills on time.
The report wasn't surprising, given that the economy as measured by the gross domestic product contracted at an annual rate of 0.1 percent during the quarter. Consumers and businesses were holding back on spending while they waited for the outcome of negotiations in Congress over the "fiscal cliff," the billions of dollars in tax increases and budget cuts that were scheduled to take effect Jan. 1. The impasse in Washington wasn't resolved until after New Year's Day, too late to help the economy and small businesses, during the fourth quarter.
Moody's Analytics' chief economist, Mark Zandi, says he expects the index to improve in 2013 although Congress is still working on cutting the budget.
"We got by the cliff reasonably well. The fiscal debate continues but it feels a lot less nerve-racking," Zandi told The Associated Press
The lingering economic effects of the drought in the Midwest also hurt businesses during the fourth quarter, Zandi said. But he predicted they won't have as big an impact this year.
Health care remains an uncertainty that has made many business owners cautious, and Zandi expects them to remain hesitant this year. But he also noted that some small businesses are taking out loans or increasing their lines of credit after cutting their borrowing during the recession.
"That means there's more business activity," Zandi said.
In the report, Experian and Moody's Analytics said Superstorm Sandy did little damage to credit quality for small businesses in states affected by the storm. The two companies said it appears that lenders have given companies extensions on their payment deadlines, which would stop many loans from becoming delinquent. Going forward, small businesses and restaurants could feel a delayed impact from the storm if consumers spend more to fix up damaged homes, the report said.