Daily News: May 1, 2012

U.S. Small Business Lending Continues to Stall in March


The pace of lending to small businesses in the United States continues to be at a standstill, supporting the view that economic growth is headed for a further slowdown, according to PayNet’s Small Business Lending Index.

The index shows that small businesses are becoming increasingly concerned about the economy, targeting their investments to replace worn out equipment or to increase efficiency. PayNet’s analysis shows that lending is up 10% from March 2011, but has declined 3% from February 2012.

According to PayNet president William Phelan, “What is surprising about this latest release is that entrepreneurs are shying away from investments. This is particularly striking given the lowest credit risk since 2005 and an outlook for low risk through year-end 2012.”

BORROWING: Reluctant to Expand

  • The Thomson Reuters/PayNet Small Business Lending Index (SBLI) seasonally adjusted originations declined 3% – going from 101.8 in February 2012 to 98.5 in March 2012. (February 2012 was revised upward from 98.3 to 101.8)
  • Compared to the same month one year ago, the index is up 10%, while still up, March 2012 is the lowest year over year change since January 2011.
  • The jump to 110 at year-end 2011 is proving to be an artificial spike from the stimulus temporary 100% accelerated depreciation tax advantages.
  • The fall back to 98 confirms that small businesses are not yet ready to go out on a limb and aggressively expand.
  • During March 2012, small business capital investment expanded 10% versus the prior year.
  • While last year we saw the Index steadily grow, we have not yet seen 3 months of flat readings until now.

    DEBTS PAID: Financial risk has improved

  • Has approached its natural lower limit below which it cannot fall much further.

    30-Day Delinquency:

  • 30-day delinquency decreased 8 bps from 1.47% in February 2012 to 1.39% in March 2012 – the lowest level since January 2005.
  • Lenders experiencing a decrease in delinquency outnumbered lenders experiencing an increase by more than 2 to 1.
  • Year over year, delinquency continues to decrease – down 37% (83 bps) vs. March 2011.

    CREDIT RISK:

  • A look at risk by Federal Reserve District shows the large differences between these regions.
  • Atlanta, Richmond, Dallas, and Boston stand as the highest risk districts for this current business cycle.
  • The lowest risk regions are Minneapolis, Chicago, and Kansas City which are all below the national average. Minneapolis continues to be the lowest risk district as 30 Day Delinquency fell to only 51 basis points, well below the national average of 1.39%