Business owners in financial trouble will sacrifice their homes to save their companies, according to a new study from Experian, the credit rating service whose North American headquarters is in Costa Mesa.

The study of 2.7 million small U.S. businesses showed the most severely delinquent business owners continued to pay their company’s bills even as they skipped mortgage payments, said Torsten Gerwien (pictured right), vice president of Decision Sciences, an Experian division.

Three out of five promptly paid their business financial obligation before and after the mortgage delinquency and 13% paid their bills faster after the delinquency.

“It points out the importance of paying commercial debts,” Gerwien said.

In the first-of-its-kind examination of the impact of the mortgage meltdown on U.S. small businesses, Experian drew upon its massive, proprietary information of business and consumer credit behavior. The study covered 10% of the nation’s total businesses.

“Small-business owners are willing to sacrifice their homes in order to keep their businesses and maintain steady income flow,” Gerwien said. “We were really surprised by the result, but when you think about it, it makes sense.”

While banks tend to look only at mortgage and consumer payment behavior when making small-business loan decisions, “they might want to look at a blend of consumer and business debt as relationships to nurture and grow,” Gerwien said.

Almost 4 out of 100 homeowners were 90 days or more behind in their mortgage payments from April 2007 to April 2008, Experian said. Fewer than 3 out of 100 business owners were that severely delinquent on their home mortgages in the same period.

The delinquency rate for entrepreneurs rose 57% during that period, which was less than the 76% hike for all homeowners.

“By April 2008, the average homeowner was 1.5 times more likely to experience severe mortgage delinquency than the average business owner,” Gerwien said.

Experian provides business-to-business bill paying information through its Business Owner Link database.

Business owners in California, Nevada and Florida have been harder hit by the housing/mortgage crisis than others, according to Experian’s study. Those states had the highest rate of home-price increase.

Here are some of Experian’s regional comparisons (nationally less than 3% of business owners were 90+ days delinquent on home mortgages):

Business owners in certain industries were harder hit than in others. Top impact was on transportation and utilities, construction, retailers, and the financial, insurance and real estate industries.

“Transportation and utilities were hit from two sides: skyrocketing fuel costs and the housing meltdown,” Gerwien said.

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Posted in: Bankruptcy • Finance • Reports • Top posts • Experian • mortgage delinquency |

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