Small Businesses Paying Bills Later as Credit Crunch Continues to Pinch Cash Flow

QUINCY, Mass. AND BOCA RATON, Fla. — Cortera™, a community-driven business information company, announced the publication of its October 2009 Small Business Index™ (SBI) report, a monthly index of accounts receivable (A/R) activities covering businesses with less than 500 employees (the Small Business Association definition of a small business). Measuring payment activities of more than 200,000 small businesses, the Cortera October 2009 SBI™ showed small businesses slowing payments to their vendors, suppliers and other business partners over the past month, a sign of increased stress on already limited working capital. While the rate of late payments is down from its high in December 2008 of 12.6 days beyond terms, it is 28.5 percent higher than it was in October 2007. It is also 38 percent higher than the big business average for October 2009 (companies with more than 500 employees). In stark contrast to small business conditions – and offering further evidence of the unequal rates of recovery – the data reveals that big businesses are now actually, on average, paying their bills faster than they were in same period two years ago before the recession began.

“There’s little doubt that a tough lending and credit environment is creating pressure on small business owners to stretch out payments, but it’s a Catch-22. The slowing of payments between businesses is compounding cash flow related stress and causing harm to longer-term credit viability,” said Jim Swift, president and CEO of Cortera. “The best approach to stabilizing the overall credit system for small businesses is to ensure timely payments – to create a ripple effect that will reverse the current trend — and build an environment where the delinquents are weeded out and the ‘good guys’ can stand together.”

The Cortera SBI tracks late payments against agreed upon terms, measuring late accounts receivable measured in days beyond terms (Average DBT) for businesses with less than 500 employees, comparing this data with equivalent A/R metrics for large companies (greater than 500 employees) and all businesses.

About Cortera
In a sea of business information providers, Cortera is different. With over 15 years of experience serving finance professionals, Cortera combines premium business information and innovative tools with a fresh community approach to commercial credit. It represents the first community for small business credit reporting and a fundamentally new way to capture the collective insight of millions of financial transactions. As a result, small businesses can make smarter, informed decisions to ensure optimal cash flow while attracting more favorable payment terms from existing and potential business partners.