Here’s a striking statistic: 93% of small business owners expect moderate or significant growth over the next 12 months.¹ However, this optimistic outlook is tempered by concerns about the timing of potential interest rate cuts by the Federal Reserve, which could ease some of the financial stress on small businesses.

In the latest episode of the Market Pulse podcast, Sarah Briscoe, lead commercial statistical analyst at Equifax, dives into the critical data and trends shaping today’s small business sector.

Equifax Small Business Indices: Measuring Vital Metrics

Sarah leverages information from the Equifax small business indices. The small business indices are a powerful tool that measures:

• small business lending volumes, 

• delinquency rates, 

• and default rates across states and industries. 

She explains the significance of these indices and how various institutions use them to benchmark performance and predict future economic changes.

"The indices measure small business lending volumes across states and industries each month, as well as the volume of delinquent debt," Sarah explained. "They are used by lending institutions and government agencies to see what has occurred and benchmark against the past, but also to predict default risk on their own portfolios."

Current Trends in Small Business Lending

Sarah highlighted recent trends in the small business indices. Sarah noted that lending activity has improved slightly, while delinquency and default rates are rising more slowly. This data suggests that despite the challenging economic environment, there is still strong demand for capital among small businesses.

"The lending index is up slightly, which means there's still a really strong demand from small businesses to get capital from lending institutions," Sarah said. She also points out that while delinquency and default rates have increased since the pandemic, they remain below levels seen during the last recession.

Industry-Specific Insights: Healthcare and Transportation

One of the key takeaways from Sarah's analysis is the varied performance of different industries. For instance, the healthcare sector is experiencing robust growth in lending activity due to high demand for services and staff.

"Lending in healthcare is growing a ton, and there's a lot of demand in that industry for staff and patient care," Sarah noted. "Even though delinquencies are up slightly, the overall growth is very strong."

In contrast, the transportation sector faces more significant challenges. The pandemic caused a surge in demand and supply chain issues, leading to an increase in new trucking and logistics businesses. But, this has also resulted in higher default rates and suppressed lending in the industry.

"Transportation is a tough one," Sarah explained. "We've seen a large increase in defaults and a suppression of lending, but it is starting to ease in the past few months, which is a good sign for the industry."

The Impact of Inflation and Interest Rates

Inflation and interest rates are critical factors for small businesses to monitor. Sarah discussed the latest inflation numbers, noting that while inflation has eased slightly, the Federal Reserve's decisions on interest rate cuts will be crucial in the coming months.

"Inflation has eased a little bit, and the Fed expects it to continue easing," Sarah said. "This is important because it influences their decisions on interest rate cuts, which will affect the cost of debt for small businesses."

Using Data for Decision Making

Equifax indices can help small  businesses make smart choices. According to Sarah, businesses can use these indices to see how they are doing compared to others helping them plan for the future.

"A lot of users of the indices can access it on our website for free," she explained. "They can use the raw data in models or in conjunction with other metrics to benchmark against what's happening in the market."

Navigating the Economic Landscape

We ended the episode discussing how important it is to keep up with economic trends and using data to make good decisions. Despite the uncertainties, the insights from our indices provide a valuable resource for navigating the current economic landscape.

About the Market Pulse Podcast

The Market Pulse Podcast offers a deep dive into the economic and credit factors impacting small businesses today. With expert insights from Sarah Briscoe and an economic update from David Fieldhouse, this episode provides a comprehensive overview of the challenges and opportunities facing small business owners in the current economic climate. 

Be sure to check out other episodes of the Market Pulse podcast and register for our upcoming Market Pulse podcast.

1. Small Business Cash Flow Trend Report for Q1 2024 from OnDeck and Ocrolus (May 23, 2024)