Small Business Loan Numbers Are 'Disheartening': PayNet

(Reuters) - Borrowing by small U.S. businesses grew in February from the year before for the 12th straight month, according to data released on Monday by PayNet Inc, as companies continued to finance the replacement of aging capital equipment.

Investment by businesses in the closely watched sector, which is considered a key driver of employment growth, fell, however, compared to the previous month for a second consecutive month, suggesting wavering confidence in the strength of the recovery and an unwillingness to invest in expansion, PayNet's president said.

The Thomson Reuters/PayNet Small Business Lending Index, which measures the overall volume of financing to U.S. small businesses, rose 15 percent in February from a year earlier, PayNet said.

Seasonally adjusted borrowing, though, fell below November's level for the second consecutive month in February. January data was revised lower.

"These numbers are a little disheartening and disappointing." William Phelan, PayNet's president and founder, said in an interview.

"There's not a lot of positive data here to support the view that small businesses are in a sustainable rebound. It looks like they're kind of running in place at best. What we're definitely not seeing is the kind of explosive growth coming out of a recession that we might hope for."

Businesses appear, however, to be having an easier time servicing their existing loans, PayNet said.

Accounts behind 180 days or more, or in default and unlikely to ever get paid, fell to 0.75 percent of total receivables in February, their lowest level in 21 months, down from 0.79 percent in January and 0.96 percent last year, according to PayNet.

Accounts 90 days or more behind in payment, or in severe delinquency, fell to 0.69 percent of total receivables in February from 0.73 percent in January and 1.34 percent last year.

Accounts in moderate delinquency, or those behind by 30 days or more, fell to 2.46 percent in February from 2.49 percent in January and 4.20 percent last year.

"They're getting their financial houses in order," Phelan said. "That's a good sign. Balance sheets are improving."

Small businesses are seen as key to the recovery because they create most of the new jobs in the United States. The money they borrow is usually earmarked for new equipment, which in turn can signal future hiring, as companies take on new employees to operate new machines.

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 250 leading U.S. capital equipment lenders. The company provides risk-management tools to the commercial lending industry.

More on Thomson Reuters/PayNet Small Business Lending Index is available here.

(Editing by Padraic Cassidy)

Copyright 2011 Thomson Reuters. Click for Restrictions.

Comments

[realitytrumpsbull]

07:27 PM on 04/04/2011

The problem with all of this is that if small businesses really did start to thrive, both government and the real estate industry(most businesses operate under some kind of property and equipment leases) would take that as a cue to advance the old zip tie another notch tighter, and raise taxes on em. I say if they really want small business to thrive, if they want people to start learning how to do for themselves in the business world, then make it so that it's an advantageous situation for those considering such a venture. Problem is, small businesses, such as restaurants, well, 1 in 2 restaurants tend to fail, and smaller specialty retail stores and so forth aren't far behind. The Dream is to have your own store, and thrive on the small scale, but the reality is that a cup of coffee in a coffee shop(one example of a small business) still sets you back $3. Prices are too high. And, they charge high prices, because that's how they make ends meet. Some people out there are still trying to practice/stuck in a cycle of Starbuck-onomics. And, customers, or prospective ones, aren't going to pay those kind of niche store prices, when they can go get a can of coffee for themselves at Big Box, and have a cup of coffee at home for .20(including the cost of electricity for brewing).   And, fuel prices aren't helping matters either, because that delivery van doesn't run on good intentions.