October 29, 2018
By Bob Coleman
Editor, Main Street Monday
Main Street Monday — Small Biz Lending Demand Increases, Credit Conditions Stable
Small business lending continued its blistering pace in August, according to the latest Strategic Insights Report from PayNet
The Thomson Reuters / PayNet Small Business Lending Index shows originations increased 7% from 145.1 in July 2018 to 154.7 in August 2018, its second-highest reading ever.
Year-over year, the index is up 16%, marking its 11th consecutive increase over the prior year and the fourth double-digit year-over-year gain in the last five months. The rolling three-month index at 148.3 is relatively flat compared to July 2018 but is up 12% on the year.
“The rapid pace of small business investment we reported last month continues in this month’s release,” says PayNet, Inc., President William Phelan.
“Recent gains in the SBLI are echoed by the NFIB Small Business Optimism Index, which climbed to a record high in August as the net share of small business owners planning to increase inventories in the next three to six months reached its highest level since 2005. All this is occurring against the backdrop of improved financial health, as PayNet’s data suggest that small businesses are not overextended and that financial stress remains muted. As a result, credit conditions for lenders are particularly healthy right now.”
“This winning streak for private companies is marked by exceptionally robust investment at low risk, signaling unusually good conditions for Main Street and commercial lending.
“Private businesses are in good shape financially and see business opportunity in taking risks. Lenders are finding increased demand for credit while loss provisions remain stable.
“While nothing on the horizon shows rising credit risks now, the additional money Main Street is putting to work will likely result in increased delinquencies as investment projects mature,” cautions Phelan.