In case our posts haven’t given it away, we’ve been watching the small business credit crunch in earnest over the past year. While the central theme always seemed to be same – big lenders get increasingly stingy, leave Main Street mom-and-pops starving for credit – our own data and our conversations with credit pros suggested that there was more to the story. A lot more. In contrast to what we were reading in the papers or hearing from the White House, it appeared that while tighter credit conditions were indeed hurting small businesses, loans were not necessarily their primary concern. Or even the primary culprit in limiting growth. This week, on the heels of a report from the National Federation of Independent Business (the NFIB), it looks as though the mainstream media may finally have turned the page. And at long last, we’re starting to get the rest of the story. We are also seeing more commentary around the great recovery divide between big businesses and small business—we’ve been tracking a similar gap for many months now as the payment behavior of big businesses has returned to a somewhat normal level while small businesses are still feeling the pinch. A few of our favorites from the week:

BusinessWeek: A Lifeline of Credit for the Recovery

Business Outlook columnist Jim Cooper’s piece (and accompanying video interview) cites the prominent NFIB report claim that lack of demand, not credit, is hurting small businesses while offering evidence of improving credit conditions that should help growth initiatives once demand picks up.

Time: Small Business, Key to Recovery, is Still Hurting

Janet Morrisey’s piece, as the headline suggests, was decidedly less rosy. According to the article, small business sales have declined 3.8% in the first 10 months of 2009. Transportation and warehouse business, manufacturing, wholesale trade, and retail trade took the brunt of the declines, with sales plunging 16.7%, 13.8%, 10.4%. and 6.7% respectively in 2009. Morrisey quotes William Dunkelberg, chief economist with the NFIB, as saying, “Capital-spending plans are at 35-year lows and inventory-investment plans are at 35-year lows. They’re just not borrowing — they’re not asking for it.”

Small Business Trends: Small Businesses: We need customers, not loans

Anita Campbell, one of our favorite small business advocates and the colorful editor of Small Business Trends, wins the prize for best headline. Her piece focuses exclusively on the NFIB report, hitting on specific findings in employment, capital expenditures, access to credit, and sales.

Please send us your favorites. Have a good weekend and remember to buy local this holiday season – you might just solve the credit crunch.

The S&P is up over 50% since its March 2009 lows and yet for most of us, the leading indicators and large company earnings seem to defy the reality on Main Street. Newsweek offered a view on why such a gap may exist – and some indicators are emerging to focus on small business sentiment — but the fact remains that most prominent economic indicators fail to paint a true view of Main Street conditions. Last month we started publishing a small business index that takes a shot at filling the gap. Based on same criteria lenders and businesses use for determining credit viability, the SBI provides a view into the cash flow on Main Street. And just as Newsweek paints the picture of the Wall Street – Main St gap, the Cortera SBI™ shows increasingly divergent behaviors between the largest of businesses and the nation’s millions of small companies.

The result is a one sided recovery. The latest data shows that while big businesses have returned to their pre-recession levels of two years ago, small business still remain over 28% higher (paying bills later) than our October ’07 report numbers. Simply put, small businesses are still paying slower than big businesses in an effort to manage their cash flow. Without any additional forms of lending at their disposal, slowing payments is their last resort. The gap, while narrowing slightly in our October Report, still stands at over 38% slower for small businesses as compared to big businesses.

A few weeks ago, The Wall Street Journal explained how small companies are getting paid more slowly by their large company customers while those same large companies are forcing the little guys to pay faster. Well, Cortera’s data is showing that the little guys are getting paid more slowly by their small business customers, too.

Our Small Business Index (SBI) shows that while small businesses (companies with less than 500 employees – the SBA definition) are improving, but they’re paying 25% slower than a year ago and 20% slower than the overall business average. It is also important to note the widening gap between big companies and small companies. Pre-recession, the measures for the average, small and big companies tracked in a tight range, but since late 2008 we’ve seen a significant gap open up. Small businesses have a 55% higher DBT than large companies.

This is a dangerous situation for small businesses and a bad trend for the economy as a whole. When the payment flow between small businesses slows, the resulting friction impedes their ability to plan, grow and sometimes even survive.

In case you missed it, there was a great front page article yesterday in the Wall Street Journal entitled “Big Firms Are Quick To Collect, Slow to Pay” about how, you guessed it, the biggest companies are speeding up their collections efforts while slowing payment to their small business partners. In essence big companies are squeezing the little guys, slowing the flow of cash to small businesses while at the same time requiring these companies to more rapidly pay their bills. This helps the big guys build their cash position, but strains the cash flow of small businesses. There are several examples in the article of bigger companies pushing out their payments to their smaller suppliers simply because they can, a trend that’s to be expected. But the article and trend raise bigger questions. With over 20 million small businesses in the US, could the credit actions taken by the largest 1% of companies temper the reinvestment and expansion activities so vital to fueling a tentative recovery? By withholding cash from the small businesses who most need it, is big business, inadvertently, prolonging the credit crunch — or at least passing along the pain?

The analysis by REL Consultancy, a division of the Hackett Group showed that “Companies with more than $5 billion in annual revenue took an average 55.8 days to pay suppliers and trade creditors in the second quarter, up 5% from 53.2 days a year earlier, according to REL. They also collected faster on their bills, taking an average 41 days versus 41.9 days a year earlier. Businesses with less than $500 million in sales paid vendors in an average 40.1 days, down 6.5% from 42.9 days, REL found. They took roughly 8% longer to collect payments, or an average 58.9 days, versus 54.4 days a year earlier.”

Has this practice started to impact your business? Are you getting squeezed by your biggest partners? Seeing shortened cash cycles? Have best practice tips for dealing with such practices? We’d love to hear from you.