* Rising borrowing points to underlying economic strength
* Loan delinquencies ebbing
By Lucia Mutikani
WASHINGTON, Jan 2 (Reuters) - Borrowing by small U.S.businesses hit its highest level in nearly four years inNovember, pointing to underlying strength in the economy.
The Thomson Reuters/PayNet Small Business Lending Index,which measures the overall volume of financing to smallbusinesses, surged 10.2 points to 106.4, the highest level sinceFebruary 2008. The index was up 18 percent from November 2010.
"We are entering a new phase of the business cycle," saidPayNet founder Bill Phelan. "Businesses are betting on thefuture with increased investment spending."
PayNet tracks borrowing by millions of small U.S. businessesand provides risk-management tools to the commercial lendingindustry.
The survey adds to other data suggesting the economygathered momentum in the final three months of 2011, whichshould help it to better handle the headwinds from the debtcrisis in Europe and fights over budget policy in Washington.
Fourth-quarter economic growth is seen exceeding a 3 percentannual pace, an acceleration from 1.8 percent in the thirdquarter.
The Thomson Reuters/PayNet small business lending index hassome leading correlation with gross domestic product, precedingchanges in the overall economy by two to five months.
"It (surge in borrowing) tells us there will be growth forat least the next quarter," said Phelan. "There is underlyingstrength in the economy that is not being reported elsewhere."
While Europe's fiscal troubles appear not to have affectedthe flow of credit to small businesses, they pose a big threatto the economy's growth prospects in 2012. Added to that is theuncertainty over fiscal policy in the United States.
The survey also found that small businesses are gettingbetter at managing their debt, with loan delinquenciescontinuing to drop.
Accounts in moderate delinquency, or those behind by 30 daysor more, dropped five basis points to 1.50 percent in November.Those behind 90 days or more in payments, or in severedelinquency, slipped 1 basis point to 0.39 percent.
Accounts 180 days or more, or in default and unlikely everto be paid, fell six basis points to 0.58 percent.
"We are now in this new phase of growth and low risk. Thekey question is how long is this phase going to last?" saidPhelan. (Reporting By Lucia Mutikani; Editing by Neil Stempleman)