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PayNet: July Small Business Lending Index Signals Caution

September 04, 2012, 07:58 AM
Filed Under: Economy

The latest measures of the small business economy signal business should prepare now for forthcoming economic weakness. Early stages of financial stress are emerging across all businesses.
The Thomson Reuters/PayNet Small Business Lending Index (SBLI) showed a small 3% monthly gain in July over the prior month, and it grew 14% over the same month last year. However, the trends are towards slower economic growth as results for 5 of the last 7 months reveal no growth or an actual decline in monthly business investment by US small businesses.

Rising financial hardship for small businesses means a higher probability of a sharp decline for the US economy.

Moderate loan delinquencies, those 30 days or more past due, rose 4 basis points to 1.20%. This is the first rise in loan delinquencies since January 2010, or 30 months.  Longer-term delinquency rates eased, however. Accounts behind 9 days or more, or in severe delinquency, dipped to 0.26 percent from 0.29 percent. Accounts behind 180 days or more, which are considered in default and unlikely to be paid, fell to 0.32 percent from 0.38 percent.

Small businesses as a group found it more difficult to pay their bills last month, and even the highest quality small businesses as a group found it slightly harder to pay their bills.

“Businesses and especially banks should assess their blind spots,” says William Phelan, President of PayNet, Inc. “Leading indicators show that retail and transportation sectors remain the most vulnerable to a downturn, and stress testing reveals a 300% jump in the business failure rate going forward under worst case scenarios.”

PayNet data takes the pulse of U.S. Small Business economy and has proven to be a leading indicator of the GDP between 2-5 months. Chicago-based PayNet, Inc. maintains the largest repository of historical lease and loan payment information based on the U.S. small-business economy. PayNet collects real-time loan information, such as originations and delinquencies, from more than 300 leading U.S. lenders.  The company's proprietary database -updated weekly - is the largest collections of commercial loans & leases, encompassing more than 19 million current and historic contracts worth more than $1 trillion.

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