More small business loans in arrears

By Ros Krasny

SAN FRANCISCO (Reuters) - Delinquent loans at small and medium-sized U.S. businesses jumped in May to new highs for the current recession, according to PayNet Inc, a firm that provides risk-management tools to the commercial lending industry.

PayNet on Wednesday said that accounts in moderate delinquency, or behind by 30 days or more, rose to 4.43 percent in May from 4.28 percent in April .

That buried some of the tentative "green shoots" seen in April's data, which showed moderate delinquencies down for the first time in six months.

"The current business credit cycle is really only partially complete," Bill Phelan, PayNet's president and founder, told Reuters in a telephone interview. "We still think we're in the thick of it."

A year ago loans in moderate delinquency were at 3.56 percent. The monthly average since 2000 has been 4.08 percent.

Accounts that were 90 days or more behind in payment, or in severe delinquency, rose to 1.48 percent in May from 1.46 percent in April and were up from 1.07 percent a year earlier.

Those that were 180 days behind, or considered to be in default, hit 0.78 percent against 0.73 percent in April and 0.44 percent in May 2008.

Phelan said weakness in the construction and transportation sector remains "very dramatic" but that few sectors have gone unscathed. "The force and breadth of (the downturn) seems so much greater this time," he said.

PayNet, based in Skokie, Illinois, collects and analyzes real-time loan information, such as originations and delinquencies, from more than 200 leading U.S. capital equipment lenders.

The company's proprietary database encompasses more than 14 million current and historic contracts, worth some $645 billion.

More than half the money invested in plants, equipment and software in the United States in any given year is financed with loans, leases and lines of credit.

(Editing by Chizu Nomiyama)