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Canada's Magazine for Financing & Leasing Executives

April 4 , 2013

U.S. small businesses cut borrowing for second straight month

TORONTO--Small U.S. businesses cut back on borrowing in February for a second straight month, hinting at slower growth ahead even as other economic data shows the recovery picked up in the early part of the year.

The Thomson Reuters/PayNet Small Business Lending Index, which measures the overall volume of financing to small U.S. companies, fell to 101.3 from a downwardly revised 111.7 in January, PayNet said on Tuesday.

PayNet's lending index typically correlates to overall economic growth one or two quarters in the future.

The U.S. Federal Reserve last September moved to push down long-term borrowing costs with a third round of asset purchases, pledging to keep buying until the labor market improves substantially.

That stimulus, coupled with rock-bottom short-term interest rates since December 2008, has done little to get smaller U.S. firms to expand, the index shows.

"They don't have a conviction that they should go all in," PayNet founder Bill Phelan said in an interview. Without that conviction, small businesses are not expanding quickly, and are not as apt to hire.

The data provides a counterpart to generally positive signals from the broader economy, including a rise in consumer spending and sentiment, and at least some signs of strength at factories.

But small business borrowing grew just 2 percent from a year earlier, the index showed, the slowest year-on-year increase since September. PayNet had initially reported the January figure at 113.1.

Perhaps more telling are early signs that financial stress is building.

Trucking companies, whose behavior historically has led that of other small businesses, are having more trouble paying back their loans.

Delinquencies of 31 to 180 days among transportation service and warehouses companies rose to 1.85 percent in February, up from an all-time low of 1.55 percent last August, Phelan said.

Delinquencies in other sectors are down. Overall, accounts overdue by one to six months slid to 1.58 percent from 1.62 percent of all loans made.

PayNet collects real-time loan information, such as originations and delinquencies, from more than 250 leading U.S. lenders



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