September 1, 2010 / 9:08 AM / in 7 years

Exclusive: U.S. small business borrowing edges up in July

CHICAGO (Reuters) - Small U.S. businesses boosted borrowing just slightly in July, data released by PayNet Inc on Wednesday showed, adding to signs the economic recovery is gaining little steam.

The Thomson Reuters/PayNet Small Business Lending Index, which measures the overall volume of financing to U.S. small businesses, rose 2 percent in July from a year earlier, PayNet said.

Business borrowing remains at historically low levels as high unemployment keeps down consumer demand and firms delay making new capital investments, said William Phelan, PayNet’s president and founder.

“We’ve stalled or are stalling as an economy,” Phelan said in an interview. While lenders are willing to extend credit, businesses don’t want to borrow, he said: “Loan demand is very weak.”

Data released on Tuesday showed U.S. consumer confidence edged up in August and home prices gained more than expected, providing a bit of respite for investors worried recovery from the worst recession in decades is faltering.

But the outlook remains grim, with the government’s key monthly jobs report expected on Friday to show the economy shed 100,000 jobs in August and unemployment rose to 9.6 percent.

Still, separate PayNet data showed that fewer companies are falling behind on existing loan repayments, suggesting the economy is not in imminent danger of falling back into recession, Phelan said.

“I’d be much more bearish if we weren’t seeing delinquencies improving,” Phelan said.

Accounts in moderate delinquency, or those behind by 30 days or more, fell in July to 2.98 percent from 3.06 percent in June, PayNet said on Wednesday.

Accounts 90 days or more behind in payment, or in severe delinquency, fell to 0.90 percent in July from 1.01 percent in June.

Accounts behind 180 days or more, or in default and unlikely to ever get paid, fell to 0.85 percent of total receivables in July, from 0.89 percent in June, according to PayNet, which provides risk-management tools to the commercial lending industry.

The Thomson Reuters/PayNet small business lending index is correlated to developments in the overall economy, with changes in the index preceding changes in the overall U.S. economy by two to five months.

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

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