Canadian commercial lending hits 3-yr high-PayNet

* Q2 Canadian business lending index up 9 pct from Q1
* Borrowing up 22 percent year over year
* Sector growing twice as fast as U.S., says PayNet
* Commercial loan delinquencies fall in Q2

By Claire Sibonney
TORONTO, Sept. 12 (Reuters) - Canadian commercial lending
activity surged to its highest level more than in three years in
the second quarter, a signal the country's smaller companies are
supporting its tepid recovery through investment.
PayNet, which tracks commercial financing to thousands of
North American small and medium-sized businesses, said on
Wednesday its Canadian Business Lending Index rose 9 percent
from the first quarter and 22 percent year over year.
"It's across the country," said Anthony Zambon, director of
PayNet Canada. However, he noted that activity in Western Canada
was especially robust due to strong international demand for the
region's oil and other natural resources.
"These companies need to replace their machinery and
equipment to keep operating. They had gotten to a stage where
they've held off on this investment ... so there's a pent up
need."
The commercial finance sector includes non-bank players such
as machinery makers, whose loans and leases to customers are
secured against the equipment sold.
The data marked the seventh consecutive quarter of growth
since bottoming out in 2010, and the fourth straight
double-digit advance on a year-over-year basis.
The Canadian PayNet index rose to 166, its highest reading
since the first quarter of 2009. The number contrasted sharply
with the corresponding U.S. index, which at around 100 was up
only 2 percent quarter over quarter and 4 percent year over
year.
"We're still maintaining growth which is twice as fast as
U.S. growth," added Zambon.
The report echoed positive sentiment from earlier this month
when data showed a surge in Canadian employment in August,
compared with disappointing numbers in the United States.

DELINQUENCIES, DEFAULTS DOWN
Other PayNet data released on Wednesday showed moderate and
severe loan delinquencies in Canada fell from the previous
quarter.
Moderate loan delinquencies - defined as those being late by
30 days or more - were down to a previous record index low of
1.09 percent of total loans in June from 1.41 percent in March.
Severe loans in arrears - those behind more than 90 days -
were down to 0.38 percent in June from 0.50 percent three months
earlier.
Meanwhile, the business failure rate in Canada was at its
lowest level since 2005, the year PayNet began collecting the
data. Zambon cited dramatic drops in defaults in various sectors
including manufacturing, retail and transportation since the
height of the global recession in 2009.
"The important thing here is that the small business economy
is strong and healthy and they're continuing to invest ... and
also expand with regards to their businesses," said Zambon.