Small Business Health IndexJune 2012 On a more positive note, the Failure Ratio Index con- tinues to show significant favorable movements. Small business failures have declined by approximately 35 percent in April 2012 compared to April 2010. This im- provement signifies a post-recession recovery of small businesses, at least in terms of their financial health. This optimism is also supported by measures of delin- quency rate as the values have steadily been improving. The percent of delinquent dollars greater than 90 days past due has decreased by roughly eight percent in April 2012 compared to the first quarter of 2010. Although the drop in delinquent dollars is not as remarkable as that of business failures, this component also purports an optimistic outlook for small business. The card delinquency rates also show improvement. The percent of cards 61 plus days delinquent has declined D&B Key Observations by approximately 19 percent. The Card Delinquency 61 days past due Index has been on a moderate upswing • espite the continuing challenges in the D since the last quarter of 2011 and its value stood at 41.10 macroeconomic environment the June index reached its highest level in two years in April 2012 compared to 32.69 during the first quarter of 2012. • ccess to credit remains a challenge but other A So the story remains, small businesses are still strug- measures continue to improve gling to hit their stride due to the tepid economic • mproved financial health continues to provides I recovery and lingering impacts of the violent economic evidence of aggressive restructuring downturn of 2008. Financially the small business sector of the U.S. economy has improved their balance sheets and this improvement bodes well for the sector despite the limited top line growth.Dun Bradstreet’s monthly composite index in April2012 was in-line with past months, signifying the im-proving health of small businesses in the U.S. The value Small Business Health Index: Overall (Dec 2004=100)of the index stood at 95.35 in April 2012, the highest 120value attained in the last two years. The index still re-mains below its 2004 level, reflecting the strain that the 100economic cycle disproportionately placed on the smallbusiness sector. 80Behavior of the Sub-components 60Sub-components of the index remain mixed. The CreditCard Utilization portion of the index remained essentially 40flat in throughout the latter part of 2011 and registered a Dec Q3 Q2 Q1 Q4 Q3 Q2 Q1 Q4 Q3 Feb Aprslight increasing trend starting February 2012, reflecting 04 05 06 07 07 08 09 10 10 11 12 12the ongoing challenges to have access to credit.
As Dun Bradstreet, we are uniquely positioned and The index is created by following a stratified sample ofhave an “obligation” to provide our customers and the all small active businesses (excluding branches) withbusiness community with relevant insight about the total number of employees 100. The samples have theeconomy. We have utilized our rich data to create a same representation by Business Age, Number of Em-measure of small business health as is reflected in their ployees, Industry, and Payment experiences. Sample forpayment patterns, failure rates, and utilization on credit. each period contain ~10MM small businesses.The D B index is a combination of pro-cyclical and The Index value for each of the 4 parts as of Decembercounter-cyclical elements. The index is a measurement 2004 was considered as 100.of small business health relative to 2004. The index If Index in any of the following periods is higher thanshould provide the user a quick but comprehensive 100 – it means improvement in specific metric, itview of the health of small businesses. happens when value of the attribute decreases as all 4 characteristics positively correlate with higher risk.SBHI Methodology The formulas to calculate Index for quarter n(qn):The Index1 is based on 4 parts: Index1(qn)=(Credit_card_utilization(Dec2004)/Credit_ • Average Credit Card Utilization card_utilization(qn))*100 • ercent of Credit Cards with outstanding P Index2(qn)=(Percent_Credit_cards_cyc3p(Dec2004)/ balance cycle3+ (61DPD+) Percent_Credit_cards_cyc3p(qn))*100 • atio number of failures in the last 12 months R Index3(qn)=(Ratio Failures over prior year (Dec2004)/ over prior 12 months Ratio of failures over prior year(qn))*100 • ercent of delinquent dollars 91DPD+ out of all P Index4(qn)=(Percent of delinquent $91DPDP(Dec2004)/ outstanding balance Percent of delinquent $91DPDP(qn))*100 Composite Final Index=(Index1+Index2+index3+ind ex4)/4;