Small-business lending has hit its highest level in four years, says a new report.
Lending jumped by 18 percent between November 2010 and November 2011, according to the Thomson Reuters/PayNet Small Business Lending Index. That figure puts small-business financing at its highest level since February 2008, when the downturn started. Meanwhile separate reports showed that bankruptcy filings are down as are the number of people applying for unemployment benefits: other signs of economic recovery.
The surge in the index shows how small businesses have adapted over the past four years to become more profitable—and with lower-risk loan profiles—said William Phelan, president of Skokie, Ill.-based PayNet, which provides risk-management tools.
“We are entering a new phase of the business cycle,” Phelan told Reuters. “Businesses are betting on the future with increased investment spending.”
He added that the surge in borrowing "tells us there will be growth for at least the next quarter. There is underlying strength in the economy that is not being reported elsewhere."
U.S. small business has come a long way from 2009, when about 7 percent went under, he said. Just 3 percent are expected to shut their doors in 2012.
“We’ve seen delinquencies improve consistently to levels that are now below risk from 2005, so that lends confidence in my mind that we’ve got these millions of companies in the United States that now have financial capacity that didn’t exist three years ago,” Phelan said.
The survey also found more small business owners are on top of their debts. The number of loans in "moderate delinquency" (behind by 30 days or more) and "severe delinquency" (behind by 90 days or more) both declined in November. Moderate delinquencies dropped five basis points to 1.5 percent, while severe delinquencies dipped one basis point to 0.3 percent. Accounts behind by 180 days or more, or in default and unlikely ever to be paid, fell six basis points to 0.58 percent.
Meanwhile, bankruptcy filings decreased nationwide, with new case filings down by 12 percent.
That's according to the American Bankruptcy Institute, a Washington, D.C.-area trade group.
And last month, the U.S. Department of Labor reported that the four-week average of people applying for unemployment sank to 375,000—the lowest level since June 2008.
Said Phelan: "We are now in this new phase of growth and low risk. The key question is how long is this phase going to last?"
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