U.S. small-business borrowing edges up: Paynet

CHICAGO Sun Aug 1, 2010 1:12pm EDT

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CHICAGO (Reuters) - Borrowing by small U.S. businesses edged up in June, data released by PayNet Inc on Monday showed, but the bounce fell well short of suggesting the economy is gaining steam.

The Thomson Reuters/Paynet Small Business Lending Index, which measures the overall volume of financing to U.S. small businesses, rose 4 percent in June from a year earlier, PayNet said.

"The small-business economy is still pretty much bumping along the bottom," said William Phelan, PayNet's president and founder. "We are still in this stalled mode."

U.S. Senate Republicans last week blocked a $30 billion plan to help community banks boost lending to small businesses, a measure that President Barack Obama had pushed as a way to goose small-business hiring.

The U.S. government is set to release data on Friday that economists expect to show the unemployment rate ticked up to 9.6 percent in July.

Small businesses account for about half of U.S. economic output and a large portion of job creation.

The problem is not that banks do not want lend, but that businesses do not want to borrow, Phelan said.

"The small-business owner is not aggressively borrowing to expand business right now," Phelan said. "They don't see favorable prospects for expansion."

Dallas Federal Reserve President last week offered one explanation for such hesitation, saying business leaders tell him they are holding back on new investments until they know more about the new rules and tax policy changes that are coming down the pike from Washington.

Even as companies are shying away from new loans, fewer of them are falling behind on existing loans, separate data released by PayNet on Monday showed.

Accounts in moderate delinquency, or those behind by 30 days or more, fell in June to 2.96 percent from 3.29 percent in May, PayNet said Monday. That's the lowest rate since November 2007, before the most recent recession began.

Accounts 90 days or more behind in payment, or in severe delinquency, fell to 0.99 percent in June from 1.12 percent in May.

Accounts behind 180 days or more, or in default and unlikely to ever be paid, fell to 0.88 percent of total receivables in June, from 0.92 percent in May, according to PayNet, which provides risk-management tools to the commercial lending industry.

The Thomson Reuters/Paynet Small Business Lending Index is correlated to developments in the overall economy, with changes in the index preceding changes in the overall U.S. economy by two to five months.

PayNet collects real-time loan information, such as originations and delinquencies, from more than 200 leading U.S. capital equipment lenders.

(Reporting by Ann Saphir; Editing by Steve Orlofsky)

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