In Credit Crunch, Business Comes First
September 8th, 2008
By The XBanker
Business owners are electing to pay business debts at the expense of personal debts, reports Experian(tm). In a comprehensive study covering 2.7 million business owners over the course of a year, the global information services company found that found that business owners with a severe mortgage delinquency were more likely to pay their business obligations instead of their mortgage.
Experian’s research showed that because of deteriorating equity, high mortgage payments and limited refinancing options, business owners chose to ensure the business’ survival, preserving their source of income at the risk of losing their home. That’s the bad news.
Here’s the good news:
Business owners were less likely to experience a 90+ day delinquency on their mortgage than other consumers. In fact, by April 2008, the average home owner was 1.5 times more likely to experience severe mortgage delinquency than the average business owner
Additionally, Experian’s study found that small-business owners are relying on commercial lending options more often than personal financing options, to support their businesses. We think that’s smart business and it may very well allow the business owner to keep their business even if they have to start over personally.
But of course, the downside is that business owners’ personal credit can impact their business financing. Experian, which sells a credit score that blends the business owner’s credit with the credit of the business, points out that consumer scores work great for assessing consumer risk, but their blended score performs nearly twice as well as a consumer score for assessing business risk.
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