Small business borrowing rises: PayNet

Current and prospective small business owners talk to vendors with information about state, federal, and private funding resources at a Small Business Financing Fair in Manchester, New Hampshire in this June 29, 2009 file photo.

CHICAGO (Reuters) - The growth of borrowing among small U.S. businesses moderated in September but the overall level still registered a 14th monthly double-digit increase in a fresh sign the economy is set to grow at a stable pace.

The Thomson Reuters/PayNet Small Business Lending Index, which measures the overall volume of financing to U.S. small businesses, rose 14 percent, after increasing a revised 18 percent in August, PayNet said on Wednesday.

Increased borrowing by small businesses points to better times for the broader economy because small firms account for the lion's share of new hiring. Companies use loans to buy equipment, and they need people to operate that equipment.

"We're entering this slow-growth, low-risk phase of the business cycle," PayNet founder Bill Phelan said in an interview. "The last time, that phase lasted four to six quarters."

The data comes as the Federal Reserve enters the second day of a two-day policy-setting meeting. A statement due mid-day on Wednesday may provide hints on how close it is to providing new stimulus to boost a recovery that Fed Chairman Ben Bernanke said last month was "close to faltering."

Two years into a rebound from the worst recession in decades, the United States is still dogged by 9.1 percent unemployment. However, there have been a few bright spots in data, including October auto sales, which pointed to the strongest showing since the start of 2011.

PayNet tracks borrowing by millions of small U.S. businesses, which cut back dramatically on borrowing in 2008 and 2009 but are now back to borrowing at levels close to those registered in 2005.

Meanwhile, a drop in delinquencies to a record low suggests companies are in better financial health, PayNet data show.

Accounts 90 days or more behind in payment, or in severe delinquency, fell to 0.41 percent in September, a record, from 0.46 percent in August.

Accounts in moderate delinquency, or those behind by 30 days or more, fell to 1.63 percent from 1.67 percent in August, PayNet said.

Accounts behind 180 days or more, or in default and unlikely to ever get paid, fell to 0.65 percent of total receivables in September, from 0.68 percent in August, 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 250 leading U.S. capital equipment lenders. (More on Thomson Reuters/PayNet Small Business Lending Index is available here)

(Reporting by Ann Saphir; Editing by Andrew Hay)