Small Business Payment Speed Slowing, Index Shows

Small businesses are slower to pay the tab than big businesses, reveals Cortera’s September 2009 Small Business Index (SBI), a new monthly index of accounts receivable activities for businesses with less than 500 employees. Specifically, the data shows small businesses are paying invoices 25% slower than a year ago, and 20% slower than the overall business average.

More interestingly, the data reveals small businesses have a 55% higher days-beyond-terms rate than large businesses, while prior to the recession, the rate hovered much closer together. This widening gap for small businesses is just another indicator of awful things: a prolonged, unhealthy financial portrait that stifles growth.

“The latest Cortera SBI data shows a concerning gap between the financial performance of small and large companies,” said Jim Swift, president and chief executive, in a statement. “While the economy is steadily improving, we are still seeing numbers that show small businesses are feeling the after effects of tough terms by their larger suppliers and a tight overall credit market. As a result, small businesses are suffering from reduced and much needed working capital – a credit crunch that impedes their ability to plan, grow and in some cases, survive.”

Cortera SBI tracks late payments against agreed upon terms. Roughly, 260,000 small businesses were tracked for the September Index.

Read more about Cortera here.

Tags: commerical-lending, cortera, sbi, small-business-banking

Comment by JJ Hornblass on October 15, 2009 at 7:52pm: The problem with this survey is that it doesn't offer actual numbers for what is considered "late." It could be that "small businesses are paying invoices 25% slower than a year ago" means that instead of it taking two hours to pay an invoice, it takes two and a half hours. Tough to get a true sense for commercial AR from this study.