Canada commercial loans in arrears decline-PayNet

* Delinquency rates below U.S. levels

* 3-month delinquency lowest since end of 2008

* 9-month delinquency lowest since Feb. 2009

By Claire Sibonney

TORONTO, Feb 17 (Reuters) - Fewer Canadian small and medium-sized businesses were behind in payments to commercial lenders in December and the sector is in much better shape than its U.S. counterpart, according to a survey by PayNet Inc.

PayNet, a provider of risk management tools to the commercial lending industry, said loan information it collected in December showed Canadian accounts in moderate delinquency, which it defines as being behind 30 days, fell to 3.14 percent.

This was the lowest level since a year earlier and compared with a U.S. rate of about 4.22 percent. The Canadian rate last year rose as high as 3.8 percent in August.

"What that's saying is there are less financially stressed small businesses in Canada. They are able to meet their loan payments at a much higher frequency than they were in the past," Bill Phelan, president of PayNet, told Reuters.

"We're on a trend towards pulling out of this recession."

The commercial finance sector includes nonbank players such as machinery makers, whose loans and leases to customers are secured against the equipment sold.

Skokie, Illinois-based PayNet said Canadian loan delinquencies behind 90 days were at 1.32 percent in December, the lowest level since February 2009 and below the 1.34 percent level seen in the United States.

"Businesses are seeing the demand for economic recovery start to follow through in terms of demand for goods and services and that really shows up in those small business lending index numbers," Phelan said.

He added that fewer costs, with companies downsizing during the recession, along with a stricter Canadian payment structure that let lenders stay more on top of their borrowers also accounted for some of the improvement.

Canada's economy suffered less than the United States from the financial crisis and resulting recession, partly because its banking sector had little or no exposure to the subprime housing meltdown.

Canadian banks emerged from the financial crisis relatively unscathed compared with global rivals, having accepted no government bailouts. There were no major financial industry bankruptcies, and the nation's biggest lenders have built huge piles of cash to offset losses from bad loans. [ID:nN1563435] (Reporting by Claire Sibonney; Editing by Jeffrey Hodgson)