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(Ann Saphir) – Borrowing by small businesses surged in April, data released by PayNet Inc on Wednesday showed, providing some evidence the economy is not headed for a prolonged soft patch. The Thomson Reuters/PayNet Small Business Lending Index, which measures the overall volume of financing to small businesses, rose 17 percent in April from a year earlier, PayNet said. It was the ninth straight double-digit rise in the index. A string of disappointing economic data, including on Tuesday alone a double dip in home prices, pessimistic consumers and a manufacturing slowdown in the Midwest, has some economists worrying whether the country is headed for slower growth for the rest of the year. GDP grew by only 1.8 percent in the first quarter. While the borrowing index slipped about 1 percent from the prior month, the continued year-over-year gains suggest small businesses are primed to grow once demand for their goods and services picks back up, said William Phelan, PayNet’s president and founder. “The fact that small businesses are hanging in there is a good sign for the economy” Phelan said in an interview. “The data tells us they are having more of a pause than a major contraction.” Borrowing by small businesses is seen as a harbinger for the broader economy because small firms account for as much as 80 percent of new hiring. The Thomson Reuters/PayNet index has proven a good predictor of GDP trends about two to five months in advance. Separate data released by PayNet on Wednesday showed that fewer companies are falling behind on their existing loan payments, and suggests businesses have the capacity to take on new loans when needed. Accounts in moderate delinquency, or those behind by 30 days or more, fell in April to 2.06 percent, near levels common before the recent recession. Accounts 90 days or more behind in payment, or in severe delinquency, fell to 0.64 percent in April from 0.67 percent in March. Accounts behind 180 days or more, or in default and unlikely to ever get paid, fell to 0.76 percent of total receivables in April, from 0.77 percent in March, according to PayNet, which provides risk-management tools to the commercial lending industry. The Thomson Reuters/PayNet small business lending index is correlated to developments in the overall economy, with changes in the index preceding changes in the overall U.S. economy by two to five months. PayNet collects real-time loan information, such as originations and delinquencies, from more than 250 leading U.S. capital equipment lenders. (Reporting by Ann Saphir, Editing by Chizu Nomiyama) Copyright 2011 Thomson Reuters. Click for Restrictions .
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Small Business Borrowing Rises: PayNet
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by nytimes.com on April 4, 2011
Huffington Post…
(Reuters) – Borrowing by small U.S. businesses grew in February from the year before for the 12th straight month, according to data released on Monday by PayNet Inc, as companies continued to finance the replacement of aging capital equipment. Investment by businesses in the closely watched sector, which is considered a key driver of employment growth, fell, however, compared to the previous month for a second consecutive month, suggesting wavering confidence in the strength of the recovery and an unwillingness to invest in expansion, PayNet’s president said. The Thomson Reuters/PayNet Small Business Lending Index, which measures the overall volume of financing to U.S. small businesses, rose 15 percent in February from a year earlier, PayNet said. Seasonally adjusted borrowing, though, fell below November’s level for the second consecutive month in February. January data was revised lower. “These numbers are a little disheartening and disappointing.” William Phelan, PayNet’s president and founder, said in an interview. “There’s not a lot of positive data here to support the view that small businesses are in a sustainable rebound. It looks like they’re kind of running in place at best. What we’re definitely not seeing is the kind of explosive growth coming out of a recession that we might hope for.” Businesses appear, however, to be having an easier time servicing their existing loans, PayNet said. Accounts behind 180 days or more, or in default and unlikely to ever get paid, fell to 0.75 percent of total receivables in February, their lowest level in 21 months, down from 0.79 percent in January and 0.96 percent last year, according to PayNet. Accounts 90 days or more behind in payment, or in severe delinquency, fell to 0.69 percent of total receivables in February from 0.73 percent in January and 1.34 percent last year. Accounts in moderate delinquency, or those behind by 30 days or more, fell to 2.46 percent in February from 2.49 percent in January and 4.20 percent last year. “They’re getting their financial houses in order,” Phelan said. “That’s a good sign. Balance sheets are improving.” Small businesses are seen as key to the recovery because they create most of the new jobs in the United States. The money they borrow is usually earmarked for new equipment, which in turn can signal future hiring, as companies take on new employees to operate new machines. The Thomson Reuters/PayNet small business lending index is correlated to developments in the overall economy, with changes in the index preceding changes in the overall U.S. economy by two to five months. PayNet collects real-time loan information, such as originations and delinquencies, from more than 250 leading U.S. capital equipment lenders. The company provides risk-management tools to the commercial lending industry. More on Thomson Reuters/PayNet Small Business Lending Index is available here . (Editing by Padraic Cassidy) Copyright 2011 Thomson Reuters. Click for Restrictions .
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Small Business Loan Numbers Are ‘Disheartening’: PayNet
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