The small business health index reached its highest level in two years in June 2012, signaling improving health for small businesses. While access to credit remains challenging, other measures like business failure rates and delinquent payments are down significantly from 2010 levels. Although top-line growth remains limited, small businesses have strengthened their balance sheets in recent years, providing evidence of effective restructuring during the economic recovery.

1. Small Business Health Index
June 2012
On a more positive note, the Failure Ratio Index con-
tinues to show significant favorable movements. Small
business failures have declined by approximately 35
percent in April 2012 compared to April 2010. This im-
provement signifies a post-recession recovery of small
businesses, at least in terms of their financial health.
This optimism is also supported by measures of delin-
quency rate as the values have steadily been improving.
The percent of delinquent dollars greater than 90 days
past due has decreased by roughly eight percent in April
2012 compared to the first quarter of 2010. Although the
drop in delinquent dollars is not as remarkable as that
of business failures, this component also purports an
optimistic outlook for small business.
The card delinquency rates also show improvement. The
percent of cards 61 plus days delinquent has declined
D&B Key Observations by approximately 19 percent. The Card Delinquency 61
days past due Index has been on a moderate upswing
• espite the continuing challenges in the
D
since the last quarter of 2011 and its value stood at 41.10
macroeconomic environment the June index
reached its highest level in two years in April 2012 compared to 32.69 during the first quarter
of 2012.
• ccess to credit remains a challenge but other
A So the story remains, small businesses are still strug-
measures continue to improve
gling to hit their stride due to the tepid economic
• mproved financial health continues to provides
I recovery and lingering impacts of the violent economic
evidence of aggressive restructuring downturn of 2008. Financially the small business sector
of the U.S. economy has improved their balance sheets
and this improvement bodes well for the sector despite
the limited top line growth.
Dun Bradstreet’s monthly composite index in April
2012 was in-line with past months, signifying the im-
proving health of small businesses in the U.S. The value Small Business Health Index: Overall (Dec 2004=100)
of the index stood at 95.35 in April 2012, the highest 120
value attained in the last two years. The index still re-
mains below its 2004 level, reflecting the strain that the
100
economic cycle disproportionately placed on the small
business sector.
80
Behavior of the Sub-components
60
Sub-components of the index remain mixed. The Credit
Card Utilization portion of the index remained essentially
40
flat in throughout the latter part of 2011 and registered a
Dec Q3 Q2 Q1 Q4 Q3 Q2 Q1 Q4 Q3 Feb Apr
slight increasing trend starting February 2012, reflecting 04 05 06 07 07 08 09 10 10 11 12 12
the ongoing challenges to have access to credit.

2. As Dun Bradstreet, we are uniquely positioned and The index is created by following a stratified sample of
have an “obligation” to provide our customers and the all small active businesses (excluding branches) with
business community with relevant insight about the total number of employees 100. The samples have the
economy. We have utilized our rich data to create a same representation by Business Age, Number of Em-
measure of small business health as is reflected in their ployees, Industry, and Payment experiences. Sample for
payment patterns, failure rates, and utilization on credit. each period contain ~10MM small businesses.
The D B index is a combination of pro-cyclical and The Index value for each of the 4 parts as of December
counter-cyclical elements. The index is a measurement 2004 was considered as 100.
of small business health relative to 2004. The index
If Index in any of the following periods is higher than
should provide the user a quick but comprehensive
100 – it means improvement in specific metric, it
view of the health of small businesses.
happens when value of the attribute decreases as all
4 characteristics positively correlate with higher risk.
SBHI Methodology
The formulas to calculate Index for quarter n(qn):
The Index1 is based on 4 parts:
Index1(qn)=(Credit_card_utilization(Dec2004)/Credit_
• Average Credit Card Utilization
card_utilization(qn))*100
• ercent of Credit Cards with outstanding
P
Index2(qn)=(Percent_Credit_cards_cyc3p(Dec2004)/
balance cycle3+ (61DPD+)
Percent_Credit_cards_cyc3p(qn))*100
• atio number of failures in the last 12 months
R
Index3(qn)=(Ratio Failures over prior year (Dec2004)/
over prior 12 months
Ratio of failures over prior year(qn))*100
• ercent of delinquent dollars 91DPD+ out of all
P
Index4(qn)=(Percent of delinquent $91DPDP(Dec2004)/
outstanding balance
Percent of delinquent $91DPDP(qn))*100
Composite Final Index=(Index1+Index2+index3+ind
ex4)/4;