Exclusive: U.S. small business loans in arrears down: PayNet

BOSTON (Reuters) - Delinquencies among small and medium-sized U.S. business borrowers fell in October for a third straight month, according to PayNet Inc, which provides risk-management tools to the commercial lending industry.

Current and prospective small business owners walk past a display from the U.S. Small Business Administration at a Small Business Financing Fair in Manchester, New Hampshire June 29, 2009. REUTERS/Brian Snyder

The improved snapshot of accounts in moderate and severe delinquency is consistent with indications that business conditions bottomed out earlier in the year.

“The financial health of these millions of companies is stabilizing and the ability to repay loans on time is improving,” said Bill Phelan, president and founder of Skokie, Illinois-based PayNet.

Accounts in moderate delinquency, or behind by 30 days or more, fell to 4.07 percent in November from 4.25 percent in October, according to PayNet.

That marked the greatest improvement in the measure since June 2004. Delinquencies were running at the lowest rate since December 2008.

Accounts 90 days or more behind in payment, or in severe delinquency, fell to 1.43 percent from 1.45 percent, a third straight monthly improvement.

Still, accounts behind 180 days or more, or in default, rose to 0.87 percent in October from 0.84 percent in September, yet another new high for the current business cycle.

PayNet’s Small Business Lending Index, which measures the overall volume of financing, fell 18 percent year-over-year in October.

In recent months the level of decline has started to flatten out, but Phelan said many companies don’t see a pressing need for new business investment.

“Demand from the consumer doesn’t exist like it’s done in the past,” he said. “Business owners are not yet comfortable in expanding their companies.”

PayNet collects real-time loan information, such as originations and delinquencies, from more than 225 leading U.S. capital equipment lenders.

The company’s proprietary database encompasses more than 16 million current and historic contracts, worth $700 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 Leslie Adler