(Corrects headline and first paragraph to show decline was
third, not fourth, month in a row)
By Ann Saphir
May 1 Small U.S. businesses cut back on
borrowing a third straight month in March, all but reversing a
short-lived surge after the Federal Reserve launched its
asset-buying program aimed at boosting growth and jobs.
The Thomson Reuters/PayNet Small Business Lending Index,
which measures the overall volume of financing to small U.S.
companies, fell to 98.5 from an upwardly revised 105.4 in
February, PayNet said on Wednesday. PayNet had initially
reported the February figure at 101.3.
Business borrowing can point to trends in growth and
employment, because when small firms take out loans they
generally spend the money on new tools, factories and equipment.
Such capital investment 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.
Fed policymakers are set to complete a two-day meeting on
Wednesday afternoon, and are expected to hold to their current
program of buying $85 billion a month of Treasuries and
housing-backed bonds. They are also expected to renew a pledge
to keep short-term rates at rock-bottom until unemployment drops
to at least 6.5 percent, assuming inflation stays under control.
The Fed meeting comes against a backdrop of mixed economic
signals, with consumer confidence and home prices rising, but
manufacturing in the U.S. Midwest unexpectedly shrinking.
By contrast, PayNet's small-business lending survey has been
throwing off gloomy signals for months.
"They don't have an appetite to take risk... they must have
an opinion that the risks are too great," PayNet founder Bill
Phelan said in an interview.
Without that appetite, small businesses are not expanding
quickly, and are not as apt to hire.
Small business borrowing in March failed to grow at all
compared to last March, the index showed, and has given up
nearly all its gains since the Fed launched its third round of
quantitative easing last September.
And there are early signs that financial stress is building,
with companies having more trouble paying back their loans.
Delinquencies of 31 to 180 days rose to 1.6 percent of all
loans made in March, the first rise in more than three years,
PayNet data showed.
Accounts overdue as a percentage of all loans rose as high
as 4.73 percent in August 2009 before falling steadily to an
all-time low of 1.58 percent in February.
PayNet collects real-time loan information, such as
originations and delinquencies, from more than 250 leading U.S.
(Reportin by Ann Saphir; Editing by Chizu Nomiyama)