COSTA MESA, Calif. - The results of a new Experian study reveal a new business venture actually has a lower risk of going 90 days past due on their credit payments in its first year than in the third or fourth season. Experian found that the initial risk of delinquency is low because many new businesses start out as side projects. Once the business has taken off after a year or two, the small business becomes the primary income generator, bringing with it more stress on the enterprise and a higher risk of default, especially at the two to five-year range, according to the study. New or relocated businesses need to make many purchasing or hiring commitments, such as office equipment, furnishings and additional employees, Experian found. They are often also flush with start-up capital. Still, the first year for a new business remains the hardest to get through. Experian suggests monitoring "the risk of a prospect pool over time" and getting to know new businesses early before they are "inundated with competing offers."
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From the March-08, 2006 issue of Credit Union Times Magazine • Subscribe!
Experian: New Businesses May be Getting a Bad Risk Rap
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