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Main Street Monday — Small Business Lending Defaults Remain Low

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April 11, 2016

By Bob Coleman
Editor, Main Street Monday

Main Street Monday — Small Business Lending Defaults Remain Low

Default outlook remains low given the tepid investment and conservative approach to expansion small businesses have taken.

The business cycle remains intact with expansion at low risk. The moderate credit cycle continues, even with rises in some of the more economically cyclical sectors like transportation. PayNet’s data predicted a slow plodding economy earlier this year, and we continue to see it proceed on the same path.

“The good news is that once uncertainties pass, small business is poised for more expansion because their credit quality remains high,” says William Phelan, president of PayNet, Inc.

The February 2016 data release of the Thomson Reuters/PayNet Small Business Lending Index (SBLI), which is a leading economic indicator of GDP, increased to 138.0 in February from 117.7 in January, a 17% increase.

Compared to the same month one year ago, the index is up 8%.

Consumer sectors are currently driving this growth: Accommodation and Foods (+4.6%), Retail (+5.0%), Transportation (+7.2%) and Construction (+7.3%) shows the consumer with more discretionary money to spend.

“After 4 months where small business was running in retreat, this month’s report illustrates that investment by small businesses rose sharply and that they are back in the game,” says Phelan.

Financial conditions improved for small businesses in February with a surprising decrease in loans past due.

The Thomson Reuters/PayNet Small Business Delinquency Index 31-90 days past due fell 2 basis points to 1.20%. Sectors deteriorating include Ag (+.25%), Construction (+.19%) and Transportation (+.56%).

Default outlook remains low given the tepid investment and conservative approach to expansion small businesses have taken.

The business cycle remains intact with expansion at low risk. The moderate credit cycle continues, even with rises in some of the more economically cyclical sectors like transportation. PayNet’s data predicted a slow plodding economy earlier this year, and we continue to see it proceed on the same path. “The good news is that once uncertainties pass, small business is poised for more expansion because their credit quality remains high,” Phelan noted.

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