The recessionary pressure evident in the on-going financial meltdown is affecting small business payment patterns.
However, in many cases, mortgage payments are being neglected to keep firms running in the small business sector,
Experian®, a global information services company, released the results of a comprehensive study that examines the payment behavior of the small-business owner in relation to the current mortgage crisis.
The study found that business owners with a severe mortgage delinquency were more likely to pay their business obligations instead of their mortgage.
The research showed that because of deteriorating equity, high mortgage payments and limited refinancing options, business owners chose to ensure the business’ survival, preserving their source of income at the risk of losing their home.
Furthermore, the study found that small-business owners are relying on commercial lending options more often, instead of personal financing options, to support their businesses.
The study’s purpose was to determine the impact of a severely delinquent mortgage payment on a business owner’s personal and business credit behavior. For the report, Experian compiled a sample of 2.7 million business owners and analyzed the payment behavior of those owners with a mortgage over the course of one year. To complete the study, Experian leveraged proprietary data from its Business Owner Link database, which connects small-business owners and their home address.
Key Finders of Average Homeowner vs. Small Business Owner/Homeowner:
* From April 2007 to April 2008, nearly 4 out of 100 homeowners were 90+ days late paying their home mortgage
* Rate of new severely delinquent mortgages increased by 76% during the same time
* Business owners were less likely to become severely delinquent on their home mortgages
* Under 3 in 100 business owners were 90+ days late on their mortgage
* Rate of new severely delinquent mortgages increased by 57% during this time.
* By April 2008, the average home owner was 1.5 times more likely to experience severe mortgage delinquency than the average business owner
* Mortgage problem has not peaked
* New severe mortgage delinquency rate for business owners was 2.08% -- as many as 321,000 were in trouble with their home loan
* Small business owners are willing to sacrifice their homes in order to keep their businesses and maintain steady income flow
* Personal credit availability for the small business owner with home loan trouble is declining, so they are turning to commercial borrowing to finance businesses
For information on Experian’s business-to-business products and services, visit www.experian.com/b2b or call an Experian sales representative at 1-800-509-5493.