U.S. small business borrowing rose in May, signals growth ahead

Tue Jul 2, 2013 5:01am EDT

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(Reuters) - Small U.S. businesses increased borrowing for a second month in May, pointing to growth ahead for an economy still struggling to pull free from a recession that ended four years ago.

The Thomson Reuters/PayNet Small Business Lending Index, which measures the overall volume of financing to small U.S. companies, rose to 115.1 from a downwardly revised 108.1 in April, PayNet said on Tuesday.

From a year earlier, the index jumped 9 percent, putting it within striking distance of the five-year high of 116 reached in December. The April figure was originally reported at 110.5.

Because small companies typically take out loans to buy new tools, factories and equipment, an increase in borrowing can be a prelude to new hiring. Historically, PayNet's lending index has correlated to overall economic growth one or two quarters in the future.

"Small businesses are avoiding stall, and it means that there's a slow expansion that's in place," PayNet President Bill Phelan said in an interview. After a decline in the first quarter, the fresh signs of growth in borrowing mark good news, he said.

The Federal Reserve is buying $85 billion in Treasuries and mortgage-backed securities each month in an effort to boost growth and jobs. Fed Chairman Ben Bernanke last month said that if the economy continues to grow modestly, the central bank could begin easing off that monetary gas pedal later this year.

Meanwhile, financial stress at small businesses, already at historic lows, is easing further, with more companies paying back their loans on time.

Delinquencies of 31 to 180 days fell to an all-time low of 1.49 percent of all loans made in May from 1.54 percent in April, according to the Thomson Reuters/PayNet Small Business Delinquency Index.

Accounts overdue as a percentage of all loans have fallen steadily since rising as high as 4.73 percent in August 2009.

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

(Reporting by Ann Saphir; Editing by Leslie Adler)

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Comments (3)
YepYepNope wrote:
This just in, a bee was spotted outside my house; this must definitely indicate there is a swarm of bees coming.

Jul 02, 2013 8:18am EDT  --  Report as abuse
Great. More good news.

Jul 02, 2013 8:24am EDT  --  Report as abuse
james50 wrote:
how about winter is over so I have to borrow for summer stock. No I don’t plan on hiring summer help until I see the numbers increase. Based on the last few years I am lucky just to be able to turn the key this summer

Jul 02, 2013 9:58am EDT  --  Report as abuse
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