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Small business lending picks up

Good news for firms after a four-month decline

APNewswire | July 6, 2012

Lending to small businesses is recovering after a four-month decline.
 
A study released Monday by PayNet, a research firm that tracks loans to small businesses, shows that lending rose 12 percent in May from April's levels. That's the largest increase since June 2009, when the economy was pulling out of the recession.
 
William Phelan, president of PayNet, said the increase shows that small business owners are feeling more confident about borrowing for expansion. But he said the higher reading also could be a blip rather than the start of a trend. Many business owners are still uneasy about the economy and remain reserved with their spending on new equipment and hiring, he said.
 
"We expect to see steady and cautious expansion by small businesses if we avoid external shocks such as another credit crisis," Phelan said.
 
The Thomson Reuters/PayNet Small Business Lending Index rose to 108.4 in May from April's 96.6. That brings it close to the 110.5 that the index registered in December, before a four-month slide began. PayNet bases its index on new commercial loans and leases granted to the small businesses in its database.

The small business optimism index compiled by the National Federation of Independent Business has fluctuated modestly since March but remains about where it stood in February 2011.

The first critical reading about how confident businesses felt last month across the economy arrives Friday when the Labor Department releases its jobs report. Economists expect small business owners to put off aggressive action until after the presidential and congressional elections in November.
 

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