Business Borrowing Increases

Potential Sign Of Improving Labor And Credit Markets

Business Borrowing IncreasesA new report released last week by research firm PayNet shows small-business lending increased by 11% in its most recent survey period, a potential sign of improving labor and credit markets. The Thomson Reuters/PayNet Small Business Lending index, which considers commercial loan and leasing data, rose to 107.5 in October from a revised 96.4 a month earlier. PayNet's index is closely watched because it typically previews economic growth that's realized three to six months later.

Economists believe a jump in small-business lending is a signal of hiring confidence, but there hasn't been sustained movement in borrowing trends in several months. To help tip the scales, the Federal Reserve decided in September to buy more bonds to lower borrowing costs. The Fed hopes the result will be more small-business hiring and eventually a decline in the U.S. unemployment rate.

There is evidence that businesses are facing less financial stress, according to PayNet, as well. Delinquency rates continue to decrease, now falling below what analysts consider normal rates. Accounts overdue by 30 days fell to 1.2%, near the record 1.17% recorded earlier this year. Accounts behind at least 180 days – those considered in long-term delinquency – fell to 0.29% in October from 0.32% in September. Accounts behind 90 days or more were unchanged at 0.24%, PayNet said.