Small Businesses Borrowing More as Some Eye Expansion

Small Businesses Borrowing More as Some Eye ExpansionSmall businesses are borrowing more for a second month in May, suggesting that a key indicator points to sustained economic recovery.
U.S. small businesses are considered the backbone of the economy, but for many struggling owners access to credit has been restrained since the financial crisis.
That bottleneck seems to be loosening.
The Thomson Reuters/PayNet Small Business Lending Index jumped to 115.1 in May, from a downwardly revised 108.1 in April, PayNet said Tuesday. The index measures the overall volume of financing to small U.S. companies.
From a year earlier, the index jumped 9 percent. That put it closer to the five-year high of 116 reached in December. The April figure originally came in at 110.5.
An increase in borrowing can be a sign of new hiring since small business owners  typically take out loans to buy new equipment to expand production or services..
Historically, PayNet’s lending index has correlated to economic growth — one or two quarters in the future.
“Small businesses are avoiding stall, and it means that there’s a slow expansion that’s in place,” PayNet President Bill Phelan told Reuters in an interview.
After a drop in the first quarter, a rebound in borrowing is good news, Phelan said.
The Federal Reserve is buying $85 billion in Treasuries and mortgage-backed securities each month in an effort to boost growth, lending and jobs.
Fed Chairman Ben Bernanke last month said that if the economy continues to grow modestly, the central bank could begin easing off that monetary gas pedal later this year.
Meanwhile, more companies are paying back their loans on time.
Delinquencies of 31 to 180 days dropped to an all-time low of 1.49 percent of all loans made in May, from 1.54 percent in April, reports the Thomson Reuters/PayNet Small Business Delinquency Index.
Accounts overdue as a percentage of all loans have been declining since rising as high as 4.73 percent in August 2009.
PayNet collects real-time loan information, such as originations and delinquencies, from more than 250 leading U.S. lenders.

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