Small Business Credit (Cont'd)

In the last post we looked at days beyond terms for the five worst industries in Alabama. Now let's look at how Alabama stacks up with the other 49 states:

In the days beyond terms category of small business credit, Alabama isn't doing too badly. We're in the second best category. Georgia and Florida in the deep south are in the worst category. So we should feel pretty good about our position in that regard.

In the bankruptcies category, we're in the second to worst category, with Georgia and Florida doing better. Mississippi is in the best category for business bankruptcies. I wonder what they're doing in Mississippi that causes their businesses to fare so much better?

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Small Business Credit

Typically I write about the state of small business credit each summer based on the first quarters results. I thought I'd compare first quarter 2011 vs. 2012 days beyond terms. Days beyond terms is a measure of how slowly small businesses are paying their bills.  If a company has credit terms of 30 days, and they pay in 37 days, they are 7 days beyond terms. The top 5 worst industries in Alabama for 1Q2011 ranked in order of offense and the 1Q2012 rank are listed in the following table:

Industry	1Q 2011	1Q 2012	Δ Days	% Δ	Bankruptcy %
Construction	12.0	8.4	-3.6	-30.0	3.3
Business Services	9.2	5.8	-3.4	-37.0	2.1
Finance	8.9	7.5	-1.4	-15.7	1.5
Agriculture	8.8	5.5	-3.3	-37.5	1.9
Communications	8.1	6.5	-1.6	-19.8	1.6
List Average	9.4	6.7	-2.7	-28.0	2.1

The list of worst offenders is the same. However, the number of days beyond terms for this worst 5 list has dropped from 9.4 to 6.7. This is 2.7 days quicker payment for this group of industries, a 28.7% decrease in days. This is a significant improvement.


Does this mean that the recession is over? Well, no. Does it mean that the local Alabama economy is getting better? Maybe. What is does say is that these five industries are better able to meet their credit terms in the first quarter of 2012 than they were in first quarter 2011. Maybe this is a result of more financing availability. Maybe it's a weeding out of the worst offenders in the worst industries. On average, 2.1% of companies in these five industries go out of business in the first quarter of 2012. So it can be a little tricky assigning strict cause and effect to these figures. There are so many variables at work.


We'll look at bankruptcies by state and days beyond terms by state in the next post.

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