Daily News: June 1, 2012

PayNet: U.S. Small Business Lending Declines in April


The pace of borrowing by small lending to small businesses continues to decline, according to the Thomson Reuters/PayNet Small Business Lending Index, which registered 94.1 in April, down from 98.5 in March. The index registered 110.5 last December as companies expanded at year-end to take temporary advantage of tax deductions.

Survey summary:

  • This latest release shows that lending is up 7% percent from a year ago, but it’s also showing a deceleration underway. January and February rose double digit over the prior year while year over year increases fell to single digit in March and April. Thus far the Index declined 14.5% versus an average 17% increase in 2011. The first four months of 2012 nearly match the five consecutive monthly slides in the Index from January to May 2009 at the height of the recession.

  • “The good news in this report is credit risk reached new lows. Moderate loan delinquency improved to 1.29% from 1.39% in the prior month. Severe loan delinquencies, those 90 days or more past due, fell to .35% from .36%. Usually we see risk taking expand when credit spreads are so low, but not this time,” notes William Phelan, president of PayNet. “On paper it appears to be a good time to take risk, but small businesses are turning increasingly risk averse.”

  • PayNet bases its index on new commercial loans and leases granted to small businesses by the lenders in its proprietary database totaling over $1 trillion. Small businesses need to ensure the economy and their sales are growing solidly before they commit capital to business expansion. Phelan noted, “There appears to be a flight to quality underway among small businesses.”