Lending to U.S. small businesses rose in May to its highest level yet this year, while hiring and optimism sank, said a pair of new reports.
The Thomson Reuters/PayNet Small Business Lending Index rose to 108.4 from 98.6 in April. The index is based on real-time loan information, such as originations and delinquencies, collected from more than 250 U.S. lenders.
Lending on the Rise
Borrowing rose 18 percent in May from the previous year. The growth was probably helped by low interest rates and stronger corporate finances, PayNet founder Bill Phelan says.
It’s just one month’s data, he acknowledged, but adds: "I think it means we have a higher chance of sidestepping another contraction in the economy."
Other PayNet figures showed that fewer companies are delinquent on their existing loans—a good sign for their chances of current and future borrowing.
Accounts that were behind in payment by 30 days or more dipped to 1.18 percent of the total from 1.28 percent in April—and well below the May 2009 high of 4.41 percent. May 2012’s rate was the lowest level of delinquency since PayNet began tracking data in 2005.
Accounts behind 90 days or more, what PayNet calls “severe delinquency,” fell to 0.29 percent from 0.34 percent.
Accounts behind 180 days or more, which are considered in default and unlikely ever to be paid, also dipped slightly: to 0.40 percent from 0.44 percent.
Meanwhile small-business hiring dropped by 0.2 percent in June compared with May, according to SurePayroll’s Small Business Scorecard, a monthly survey that tracks the health of the U.S. small-business economy. Hiring also is down 1.6 percent from this time last year.
Says Michael Alter, CEO and president of SurePayroll: “There’s a lot of uncertainty right now in the economy in terms of what’s going to happen over the next 6 to 12 months. Taking on new workers is a big responsibility, and if I can get by and get the little bit of growth that I’m going to get in my business with my existing workforce, that’s a much easier, less risky move.”
He adds: “Existing employees are producing more and working longer hours. It’s impressive that small businesses have done more with less, but the economic climate has made it difficult to have job growth.”
Paychecks were virtually flat, increasing just 0.1 percent from May, according to the survey, and still down 1.2 percent from last year. Optimism among small-business owners also fell to 60 percent for June; last month it was 64 percent. Respondents cited concern over turmoil in Europe and slow growth in the U.S.
How do these figures compare to what you've seen in your own business?
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