Small Business Lending Rises 3% Annually says Thomson Reuters
The Thomson Reuters/PayNet Small Business Lending Index (SBLI) is essentially unchanged from October. The index rose only 3% over the same time last year, which is a far slower pace of increase than in 2010 (20%) and 2011 (16%).
According to PayNet president William Phelan, “Small businesses did not find the need to expand much in 2012. Obviously uncertainty over tax rates and costs prevailed. Overall 2012 is disappointing as the entire year has been essentially one of lower investment in productivity-enhancing projects that will generate new profits for one-half of the US economy.”
Phelan added, “When we see investing by small business owners, we’ll know the economy is really healthy. They have plenty of capital to ignite this economy but not enough has been done to create stability.”
PayNet’s Small Business Delinquency Index (SBDI) measures the financial stress of small businesses with $1MM or less in credit outstanding. The SBDI November 2012 release shows financial stress remains at business cycle lows.
Moderate loan delinquencies, those 30 days or more past due, are starting to rise. The big question is whether or not higher loan delinquencies are due to more risk taking or to increased financial stress. There has not been a lot of growth in small business investment. Higher loan delinquencies eventually mean higher defaults by small businesses.
PayNet’s data quantifies that the rate of business failures will rise in 2013 to 2 out of 100 from 1.6 out of 100, but this is still well within the long-term normal range for now.