Betting on Economic Growth, Small Businesses Boost Borrowing
U.S. small businesses increased their borrowing in November from a year ago, suggesting continued economic growth ahead even as the Federal Reserve begins to reduce its massive monetary stimulus.
The Thomson Reuters/PayNet Small Business Lending Index, which measures the volume of financing to small companies, rose 1 percent in November from a year earlier, to 111.4, PayNet said Thursday.
November, with just 20 working days, had the highest per-day borrowing rate of 2013, the data showed.
“It’s another sign of continued expansion,” PayNet founder Bill Phelan said. Small businesses “are seeing more demand for goods and services, and that’s all good for GDP.”
Small companies typically take out loans to buy new tools, factories and equipment, so more borrowing can be an early signal of increased hiring ahead.
Historically, PayNet’s lending index has correlated to overall economic growth one or two quarters in the future.
The outlook for the job market, and for economic growth more broadly,
is crucial as the Fed begins a long-awaited reduction to its bond-buying program and weighs the economy’s tolerance for subsequent cutbacks.
In December, Fed Chairman Ben Bernanke suggested the bond-buying program could be phased out completely in 2014.
A separate index showed small businesses have begun taking on slightly more risk, with delinquencies ticking up marginally from record lows.
Delinquencies of 31 to 180 days in November rose to 1.45 percent of all loans made, from 1.44 percent in October, according to the Thomson Reuters/PayNet Small Business Delinquency Index.
A measure of accounts overdue as a percentage of all loans hit a high of 4.73 percent in August 2009.
2 Responses to “Betting on Economic Growth, Small Businesses Boost Borrowing”
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The actual unemployment rate is near 25%. Yet, this writer thinks small businesses are “seeing an increased demand for goods and services.”
All I have seen in my own town, for the last several years, are small businesses going OUT of business. There are “For Rent” signs all over town in buildings which used to be rented to small business owners.
I am reminded, more and more, of the conditions of the 1930’s. There was no shortage of goods for sale. But, for the most part, nobody had any money to buy them.
There are, of course, some pockets of prosperity scattered around the U.S. But, millions of people are unemployed, out of money, and desperate.
The actual unemployment rate is 7%, yet this poster thinks we should believe a number she pulled out of some orifice. Sounds like it’s time to move from that mythical town of yours to one where so many small businesses are borrowing and hiring. Or just go on posting.