Smart Borrower Blog

Small Business Lending Slows in February


Apr 18th, 2012 @ 1:10 PM by Amber Nelson


Lending to small businesses in the U.S. flatlined in February, according to a new index reading, as lending figures for January and February were revised downward as well.

The Thomson Reuters/PayNet Small Business Lending Index, which measures total financing volume to U.S. small businesses, was almost unchanged in February at 98.3, from 98.2 in January. And while business borrowing is up 14 percent from the previous year, it still represents the slowest yearly growth rate since September.

“It’s pretty uninspired,” PayNet founder Bill Phelan said in an interview as quoted in a Reuters article. “We see this faltering as a sign that there’s caution on the part of small business owners.”

This stagnation in lending is particularly surprising as the credit risk of small business loans is near historical lows. Loan delinquencies fell to levels below those of 2005, down to 1.46 percent of all small business loans. Seriously delinquent loans are also way down at 0.38 percent.

Small businesses power a good deal of the U.S. economy, and without increased lending there may be some reprecussions for overall GDP.

“Overall concerns are that this may lead to slower growth in the economy,” said Interface Financial Group Chairman and Chief Executive Officer George Shapiro in a Marketwatch press release. The recently announced JOBS Act, which is a package of six bills that are intended to create more access to capital for entrepreneurs and small business owners, is not going to rescue many of our country’s small businesses, as they are simply too small and their revenue is not large enough for the act to have much of any impact.”

Economists are now predicting that economic growth for the U.S. slowed to between 2.0 percent and 2.5 percent during the first quarter of this year, down from a 3.0 percent annul rate in the previous quarter. That growth pace will definitely have to pick up in the coming months in order to improve the country’s 8.3 percent unemployment rate. And small businesses will have to play a big part, with increased borrowing and expansion.

About Amber Nelson
Amber Nelson is a seasoned mortgage industry writer and a regular contributor to Loan.com and Mortgage101.com.

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