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Small business loans jump

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A surge in borrowing by small businesses can be a harbinger for the broader economy, because small firms account for as much as 80 percent of new U.S. hiring.

cnbc.com | November 1, 2010

Small U.S. businesses stepped up borrowing in September, data released by PayNet showed, suggesting the recovery is gaining steam even before the Federal Reserve Bank embarks on an expected new round of monetary stimulus.

The Thomson Reuters/PayNet Small Business Lending Index, which measures the overall volume of financing to U.S. small businesses, rose 16 percent in September from a year earlier, PayNet said.

The index rose 15 percent in August, and is now at the highest level in almost two years.

A surge in borrowing by small businesses can be a harbinger for the broader economy, because small firms account for as much as 80 percent of new U.S. hiring.

Small businesses typically use the loans PayNet tracks to buy new equipment, and eventually they will need to hire people to operate it, said William Phelan, PayNet's president and founder.

"This doesn't point to anything but a robust recovery," Phelan said in an interview. "These small businesses are people who see the demand in the economy every day, and they are alert to react very quickly to that demand."

Fed policymakers hold their regular meeting Tuesday and Wednesday and are widely expected to announce a program in which the U.S. central bank will buy Treasuries in a bid to push borrowing costs lower and rekindle a recovery

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