Business Borrowing Fell in January but Still Up from Last Year
Mar 8th, 2017 @ 8:50 PM by Amber Nelson
U.S. small businesses borrowed less money in January, with borrowing falling to a three-month low, but it increased on an annual basis.
The Thomson Reuters/PayNet Small Business Lending Index declined in January to 123.3, down 8 percent from 134 in December. That is the lowest level since October’s 119.8 reading. However, PayNet sees the dip as a reflection of the “seasonality of small business investment which tends to be heavier at year end” rather than a foreboding sign of future GDP.
Yet the index has strongly corresponded to movements in the U.S. gross domestic products one to two quarters ahead, so the drop could still play a part in the coming economy.
Fortunately, compared with a year ago, the index is up 4 percent. “The makings of solid expansion emerge from this recent release. While one positive month could easily turn negative, this release shows the potential for a healthy future for small business credit,” PayNet President William Phelan said. “Rising originations, moderate loan delinquencies, rising interest rates and lower regulations mean expansion at continued low credit risk.”
The arts, entertainment and recreation sector made the biggest jump in borrowing year-over-year with a 14 percent increase. Administrative and waste services borrowed 8 percent more in January than during the same month of 2016 and the construction sector borrowed 7 percent more.
The market sectors that saw business borrowing contract included transportation with a 14 percent yearly decline, mining with a 12 percent decrease, agriculture with 9 percent and healthcare with 8 percent.
Another good sign is that small business loan delinquencies did not rise in January, with just 1.66 percent of all loans being more than 30 days past due.
“While not rocketing ahead at the double-digit rate of the stock market, small businesses got into the action in January,” said Phelan. “Solid is further shown through financial health of small businesses. While loans past due rose in other credit sectors like consumer credits cards, they remained unchanged for small businesses. These present good conditions for future growth of the small business economy.”
Amber Nelson is a seasoned mortgage industry writer and a regular contributor to Loan.com and Mortgage101.com.