Vision 2014: The State of U.S. Business Credit

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Experian Business Information Services and Moody's Analytics conduct a deep dive on the state of small business credit health. Video of this session available at http://www.experian.com/innovation/business-resources/experian-moodys-state-of-business-credit-q1-2014.jsp?WT.srch=V14_exp_slideshare

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Vision 2014: The State of U.S. Business Credit

  1. 1. ©2014 Experian Information Solutions, Inc. All rights reserved. Experian and the marks used herein are service marks or registered trademarks of Experian Information Solutions, Inc. Other product and company names mentioned herein are the trademarks of their respective owners. No part of this copyrighted work may be reproduced, modified, or distributed in any form or manner without the prior written permission of Experian. Experian Public. The state of U.S. business credit Cris deRitis Moody’s Analytics Joel Pruis Experian #vision2014 Brian Ward Experian
  2. 2. 2©2014 Experian Information Solutions, Inc. All rights reserved. Experian Public. Our speakers Cristian deRitis, PhD Senior Director Moody’s Analytics  Manages a team of economists focused on consumer credit modeling and analysis  Provides regular commentary to clients and the media on the state of consumer credit markets and small businesses  Has an interest in housing markets and housing policy and has written extensively on the future of the U.S. housing finance system  He received a Ph.D. and M.A. in Economics from Johns Hopkins University
  3. 3. 3©2014 Experian Information Solutions, Inc. All rights reserved. Experian Public. Our speakers Joel Pruis Senior Business Consultant Experian Global Consulting Practice  Senior Business Consultant dedicated to delivering programs to his clients that increase productivity and profitability, provide financial services organizations with tools to gain a competitive edge  More than 25 years of experience in origination and portfolio management for small business and commercial credit  Bachelors in Accounting, MBA from Indiana Wesleyan University
  4. 4. 4©2014 Experian Information Solutions, Inc. All rights reserved. Experian Public. Our speakers Brian D. Ward Senior Director Experian Business Information Services  Manages a team responsible for the strategic development and execution of all marketing including: awareness, demand generation, content creation and sales enablement  Deep background with big data organizations (Oracle, CA Technologies, Experian) that serve many industries  Holds a Master of Business Administration with an emphasis in management and a Bachelor of Arts in marketing from Santa Clara University
  5. 5. 5©2014 Experian Information Solutions, Inc. All rights reserved. Experian Public. Small business economic outlook Cris deRitis Senior Director Moody’s Analytics
  6. 6. 6©2014 Experian Information Solutions, Inc. All rights reserved. Experian Public. Growth to improve as government steps aside -2 -1 0 1 2 3 '08 '09 '10 '11 '12 '13 14 Percent Federal discretionary fiscal policy contribution to real GDP growth Sequester Obamacare Bush taxes over $400k Payroll tax & UI Recovery Act Other Spending Cash for Clunkers Tax rebate checks Total Fiscal Policy Stimulus Austerity Source: Moody’s Analytics
  7. 7. 7©2014 Experian Information Solutions, Inc. All rights reserved. Experian Public. 0 1 2 3 4 5 6 7 -1.0 -0.5 0.0 0.5 1.0 1.5 Jan-13 Apr-13 Jul-13 Oct-13 Jan-14 Percent Retail sales and food services % change (L) % change yr ago (R) Harsh winter weather hit retail hard Sources: Census Bureau, Moody’s Analytics
  8. 8. 8©2014 Experian Information Solutions, Inc. All rights reserved. Experian Public. Despite setback, outlook calls for faster growth as … 0 1 2 3 4 5 10 11 12 13 14F 15F 16F Percent Real GDP and spending, annualized % change Spending GDP Sources: BEA, Moody’s Analytics
  9. 9. 9©2014 Experian Information Solutions, Inc. All rights reserved. Experian Public. 15 20 25 30 35 9.5 10.0 10.5 11.0 11.5 12.0 12.5 13.0 13.5 80 82 84 86 88 90 92 94 96 98 00 02 04 06 08 10 12 Percent Percentage of disposable income Debt service (L) Adjustable Share of Liabilities (R ) … consumer debt burdens are low … Sources: Federal Reserve, BEA, Moody’s Analytics
  10. 10. 10©2014 Experian Information Solutions, Inc. All rights reserved. Experian Public. 2 3 4 5 6 7 8 9 01 02 03 04 05 06 07 08 09 10 11 12 13 14 Percent Personal savings, percentage of disposable income, three months moving average Savings rate 3-mo MA … U.S. consumers are willing to spend … Sources: BEA, Moody’s Analytics
  11. 11. 11©2014 Experian Information Solutions, Inc. All rights reserved. Experian Public. -4 -3 -2 -1 0 1 2 3 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 Percent Annual change in housing equity, $ trillion … and wealth is rising Sources: Federal Reserve, Moody’s Analytics
  12. 12. 12©2014 Experian Information Solutions, Inc. All rights reserved. Experian Public. -1.0 -0.5 0.0 0.5 1.0 1.5 2.0 0.8 1.0 1.2 1.4 1.6 1.8 2.0 70 73 76 79 82 85 88 91 94 97 00 03 06 09 12 15F 18F 21F Percent Millions Household formations (L) 20-34 year olds, change (R) New household formations will drive activity … Sources: Census Bureau, Moody’s Analytics
  13. 13. 13©2014 Experian Information Solutions, Inc. All rights reserved. Experian Public. … along with rising house prices Sources: CoreLogic, Moody’s Analytics Case-Shiller® Index, average, annual growth, percentage – 2013Q4-2016Q4 2.1% to 3% 0% to 2% 5% > 3.1% to 5% U.S.= 4.42
  14. 14. 14©2014 Experian Information Solutions, Inc. All rights reserved. Experian Public. Homebuilding to support small business growth 0.4 0.6 0.8 1.0 1.2 1.4 1.6 1.8 2.0 2.2 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 Percent Housing starts, million, seasonally adjusted annualized Sources: Census Bureau, Moody’s Analytics
  15. 15. 15©2014 Experian Information Solutions, Inc. All rights reserved. Experian Public. Wages remain a restraint but … -6 -4 -2 0 2 4 6 8 10 -5 -4 -3 -2 -1 0 1 2 3 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 Percent Three-month moving average, percentage change year ago Employment (L) Wage income (R) Sources: BEA, BLS, Moody’s Analytics
  16. 16. 16©2014 Experian Information Solutions, Inc. All rights reserved. Experian Public. … businesses are more upbeat … -30 -20 -10 0 10 20 30 40 '03 '04 '05 '06 '07 '08 '09 '10 '11 '12 '13 Percent Business confidence diffusion index Source: Moody’s Analytics The difference between the percentage of responses to the survey that are positive and the percentage that are negative
  17. 17. 17©2014 Experian Information Solutions, Inc. All rights reserved. Experian Public. … and find credit is easy; filling openings is tough -50 -40 -30 -20 -10 0 10 20 30 40 50 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 Percent Net percent of small business respondents reporting % hard to fill job openings % expecting real sales volume higher in 6 m % reporting credit is harder Sources: NFIB, Moody’s Analytics
  18. 18. 18©2014 Experian Information Solutions, Inc. All rights reserved. Experian Public. Regional credit trends Joel J. Pruis Senior business consultant Experian global consulting practice
  19. 19. 19©2014 Experian Information Solutions, Inc. All rights reserved. Experian Public. Small Business Credit Index Measures the overall condition of businesses with fewer than 100 employees
  20. 20. 20©2014 Experian Information Solutions, Inc. All rights reserved. Experian Public. Credit index flanked on both sides 9.2 9.4 9.6 9.8 10.0 10.2 10.4 10.6 -0.5 0.0 0.5 1.0 1.5 2.0 2.5 3.0 3.5 13Q1 13Q2 13Q3 13Q4 14Q1 Firms with over 100 workers Sources: Experian, Moody’s Analytics Outstanding credit, percentage change year ago (L)
  21. 21. 21©2014 Experian Information Solutions, Inc. All rights reserved. Experian Public. Delinquency trends Source: Experian Business Information Map 5.00% 7.00% 9.00% 11.00% 13.00% 15.00% 17.00% 19.00% 21.00% Q1 2013 Q2 2013 Q3 2013 Q4 2013 Q1 2014 West South Midwest Northeast Total 4.00 4.50 5.00 5.50 6.00 6.50 7.00 7.50 8.00 8.50 9.00 Q1 2013 Q2 2013 Q3 2013 Q4 2013 Q1 2014 Days beyond terms trend Bankruptcy rate trend 0.70% 0.80% 0.90% 1.00% 1.10% 1.20% 1.30% 1.40% 1.50% Q1 2013 Q2 2013 Q3 2013 Q4 2013 Q1 2014 Delinquency trend
  22. 22. 22©2014 Experian Information Solutions, Inc. All rights reserved. Experian Public. Delinquency rate trend Source: Business Information Map Bottom-five industries 12% 14% 16% 18% 20% 22% 24% 26% 1 2 3 4 5 Transportation Public Services Finance Communications Construction 6% 8% 10% 12% 14% 16% 18% Q1 2013 Q2 2013 Q3 2013 Q4 2013 Q1 2014 Health Services Hospitality Agriculture Education Services Business Services Top-five industries
  23. 23. 23©2014 Experian Information Solutions, Inc. All rights reserved. Experian Public. App Volume Index (number of apps) 0.8 0.9 1.0 1.1 1.2 1.3 1.4 1.5 Q4 2012 Q1 2013 Q2 2013 Q3 2013 Q4 2013 Q1 2014 IndextoQ42012 All credit types West South Midwest Northeast Total
  24. 24. 24©2014 Experian Information Solutions, Inc. All rights reserved. Experian Public. 40% 50% 60% 70% 80% Q4 2012 Q1 2013 Q2 2013 Q3 2013 Q4 2013 Q1 2014 All credit types West South Midwest Northeast Total Approval percentages
  25. 25. 25©2014 Experian Information Solutions, Inc. All rights reserved. Experian Public. Average request size 75 100 125 150 175 200 225 250 Q4 2012 Q1 2013 Q2 2013 Q3 2013 Q4 2013 Q1 2014 Thousands All credit types West South Midwest Northeast Total
  26. 26. 26©2014 Experian Information Solutions, Inc. All rights reserved. Experian Public. West vs. the rest 40% 50% 60% 70% 80% Q4 2012Q1 2013Q2 2013Q3 2013Q4 2013Q1 2014 West South Midwest Northeast Total 5% 9% 13% 17% 21% Q1 2013 Q2 2013 Q3 2013 Q4 2013 Q1 2014 Approval percentage Delinquency percentage 45% 55% 41% 59% 39% 61%62% 38% Line of Credit Term Loan West Northeast South Midwest Line of Credit vs. Term
  27. 27. 27©2014 Experian Information Solutions, Inc. All rights reserved. Experian Public. Business information map Brian D. Ward Senior director Experian business information services
  28. 28. 28©2014 Experian Information Solutions, Inc. All rights reserved. Experian Public. Do you heart maps?
  29. 29. 29©2014 Experian Information Solutions, Inc. All rights reserved. Experian Public.  Teacher turned realtor  Mother of two children  Permfantastic! Meet my mother-in-law *Please note: Names have been changed to ensure anonymity
  30. 30. 30©2014 Experian Information Solutions, Inc. All rights reserved. Experian Public. Pam C:  Sold one house in Las Flores that turned into 12 transactions in two years via word of mouth Las Flores (at the time):  Newer, midsized homes  Nice family amenities  Close to the freeway  Near good schools A bit of fortune!
  31. 31. 31©2014 Experian Information Solutions, Inc. All rights reserved. Experian Public. Buyer Seller Both  Prospect Mapping for success  Acquire  Manage
  32. 32. 32©2014 Experian Information Solutions, Inc. All rights reserved. Experian Public.  Police  News  Landscaping  Construction  Manufacturing The same technique is used everywhere…
  33. 33. 33©2014 Experian Information Solutions, Inc. All rights reserved. Experian Public. What do they have in common? Data: Visualization:
  34. 34. 34©2014 Experian Information Solutions, Inc. All rights reserved. Experian Public. It worked!
  35. 35. 35©2014 Experian Information Solutions, Inc. All rights reserved. Experian Public. Do you heart maps…yet?
  36. 36. 51©2014 Experian Information Solutions, Inc. All rights reserved. Experian Public.  Get it at no cost  Review it quarterly  Use it with ease  Gain a new perspective  View it now The best part about this map… experian.com/iBIM
  37. 37. 52©2014 Experian Information Solutions, Inc. All rights reserved. Experian Public. You should heart maps… …so you can be like Pam C Prospect Acquire Manage and Collect
  38. 38. 53©2014 Experian Information Solutions, Inc. All rights reserved. Experian Public. Joel.Pruis@experian.com | @joelpruis Brian.Ward@experian.com @MarketingQuack | #IHeartMaps Hear the latest from Vision 2014 in the Daily Roundup: www.experian.com/vision/blog @ExperianVision | #vision2014 Follow us on Twitter For additional information, please contact: Map: experian.com/ibim Experian: experian.com/b2b Moody’s Analytics: economy.com
  39. 39. 54©2014 Experian Information Solutions, Inc. All rights reserved. Experian Public. Visit the Experian Expert Bar to learn more about the topics and products covered in this presentation.

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