Main Street Monday — Small Business Debt Defaults Rise

August 29, 2016

By Bob Coleman
Editor, Main Street Monday

Main Street Monday — Small Business Debt Defaults Rise

Small businesses appear to be having more difficulty paying back existing loans. Loans more than 30 days past due rose in June to 1.56 percent, the highest since October 2014, data from PayNet shows.

Small business borrowing rose in June, but not enough to reverse three straight months of decline, pointing to sluggish economic growth ahead.

The PayNet index typically corresponds to U.S. gross domestic product growth one or two quarters ahead. The U.S. economy grew just 1.2 percent last quarter, after registering a meager 0.8 percent in the first quarter.

Small business borrowing is a key barometer of growth because small companies tend to do much of the hiring that drives economic gains. The figures suggest “no big contribution to GDP from private companies,” says Bill Phelan, PayNet’s president.