Small-business borrowing drops in September

CHICAGO Thu Nov 1, 2012 5:01am EDT

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CHICAGO (Reuters) - Lending to small U.S. businesses plunged in September to the lowest level in 14 months, according to a report on Thursday, declining just as the U.S. central bank launched its latest round of monetary stimulus to encourage borrowing and spending.

The Thomson Reuters/PayNet Small Business Lending Index, which measures the overall volume of financing to small U.S. companies, dropped to 94.1 from a downwardly revised 108.9 in August, PayNet said.

PayNet had initially reported the August figure as 109.9.

Borrowing was flat from a year earlier.

"It's unlikely you are going to get a lot of growth" from small businesses, PayNet founder Bill Phelan said. "It's not a positive report." Small businesses are often responsible for the bulk of new job creation after recessions.

PayNet's lending index typically correlates to economic growth one or two quarters in the future.

The Federal Reserve in mid-September unleashed a new round of bond buying to lower borrowing costs and spur businesses to spend and, eventually, to hire.

Separate PayNet data showed companies were under increasing financial stress. Accounts overdue by 30 days rose to 1.24 percent of the total, from 1.18 percent the previous month. Although the rate is low by historical standards, it was the first rise in delinquencies in more than two years.

Longer-term delinquency rates eased. Accounts behind 90 days or more, or in severe delinquency, dipped to 0.23 percent from 0.25 percent.

Accounts behind 180 days or more, which are considered in default and unlikely to be paid, fell to 0.32 percent from 0.33 percent.

PayNet collects real-time loan information, such as originations and delinquencies, from more than 250 leading U.S. lenders.

(Reporting by Ann Saphir in Chicago)

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