This infographic is an excerpt from a speech Paynet’s CEO gave to the Risk Management Association (RMA) annual Risk Management Conference in November 2017. Sounds like a fun group, right?
We’ve extracted the information we think small businesses might like to understand the most. This is a window into the way bankers look at the world, which might help you understand them a bit better when you apply for a loan.
The Risks of Small Business Loans
For many reasons, bankers focus on the risks of every type of loan they make. They ultimately measure the consequence of risk in two ways:
- what percentage of their loans are behind schedule in payment – “past due”?
- what percentage of their loans are not fully repaid – in “default“?
This infographic helps to understand what is “normal” for small business loans, as well as how risky small business loans have been over time.
As you can see near the bottom of the infographic, the answer is pretty clear. Normally small business loans default at a rate of 3%. That rate more than doubled during the Great Recession. In September 2017 the rate was 1.9%. And as of November 2017 the rate was 1.8%.
Small business loans right now are 40% “less risky” than the historical average.
Oh, and that index of lending activity? It’s up to 136.5 in December, quite a bit higher than the September number shown in this infographic.
In other words, comparatively speaking, it’s a great time to be looking for small business loans!