Canadian commercial lending rises in first quarter -PayNet

Wed May 29, 2013 4:59am EDT

* Canadian business lending index rises 4 pct in Q1 from Q4

* Borrowing up 29 pct year-over-year

* Commercial loan delinquencies also rise

By John Tilak

TORONTO, May 29 (Reuters) - Commercial borrowing by small and medium-sized businesses in Canada climbed in the first quarter, driven by robust domestic and global demand, a PayNet survey showed on Wednesday.

PayNet, which tracks commercial financing for millions of North American small and medium-sized businesses, said its Canadian Business Lending Index rose to 194, the highest level since it was created in 2005.

The index rose 4 percent in the first quarter from the fourth quarter and was up 29 percent year-over-year.

"The demand for our goods and services, and our resources is definitely fueling the increase in investment by Canadian businesses," Anthony Zambon, director of PayNet Canada, said.

"The data shows small- and medium-sized businesses are resilient and continuing to invest, with the prospect of supporting economic growth in the near future."

Small- and mid-sized businesses have been stepping up investment in the construction of plants and commercial buildings and in machinery and equipment, he added.

The advance marked the 10th consecutive quarter of growth since the index bottomed out in 2010, and the seventh straight double-digit advance on a year-over-year basis.

The PayNet data, which tracks lending across sectors including manufacturing, retail and transportation, showed that commercial loan growth in Canada outstripped growth in the United States.

"The U.S. was been wallowing," Zambon said. "The growth trend of investment by U.S. private companies is slowing. The U.S. small business lending index has fallen for the third month in a row."

The commercial lenders include independent finance companies, big banks and nonbank players such as machinery makers, whose loans and leases to customers are secured against the equipment sold.

PayNet's Canadian unit collects data on more than 700,000 loan contracts worth more than US$47 billion.

LOAN PAYMENT DELAYS LENGTHEN

Other data from PayNet showed higher loan delinquencies.

Moderate loan delinquencies - defined as those being late by 30 days or more - rose to 1.35 percent of total loans in March from 0.80 percent in December. It was the highest rate in about a year.

Severe loans in arrears - those behind more than 90 days - climbed to 0.38 percent in March, from 0.29 percent in December.

"With greater investment comes increased credit risk," Zambon said. "That's a reflection of increased activity and higher risk being taken by the lenders. That shows a return to more normal credit conditions."