Small Business Lending Increases

Borrowing Was Up 10% In August Over A Year Earlier

Small Business LendingSmall business lending is on the rise in the United States, indicating that greater economic growth could be in the cards a quarter or two down the line. Measuring the overall volume of financing to small businesses in the U.S., the ThomsonReuters/PayNet Small Business Lending Index, released yesterday, surged upward in August to 109.9, the highest level this year. The August increase marked the second straight month in which the index rose; July's reading was 106.7.

In all, borrowing was up 10% in August over a year earlier. PayNet's lending index often correlates to economic gain in subsequent quarters. "We've got a winning streak going," PayNet Founder Bill Phelan told Reuters. "These business owners are looking out three to six to nine months, and they are seeing some positive profit-producing opportunities: there must be something these business owners are seeing."

The upswing in lending predates the new stimulus measures that the Federal Reserve introduced last month. Those initiatives include bond-buying aimed at lower borrowing costs and encouraging business to spend and hire.

Meanwhile, separate PayNet data showed that some of the financial clouds hovering over small businesses are beginning to break up. Accounts overdue by 30 days fell to a new record low - 1.16% of the total - from 1.18% the previous month. Longer-term delinquency rates also declined; accounts behind 90 days or more dipped to 0.25% from 0.27%. PayNet's index is based on real-time loan information collected from more than 250 leading American lenders.