Smart Borrower Blog

Small Business Lending Ticked Up in June

Aug 10th, 2016 @ 9:04 PM by Amber Nelson

U.S. small businesses increased their borrowing in June compared with the month before, but fell from the year-ago level, according to new data, a sign that the economy may continue to limp along for a few quarters.

The Thomson Reuters/PayNet Small Business Lending Index rose to 138.9 in June, up from 131.1 in May. On a yearly basis, however, index is down 5 percent, with June marking the third consecutive month of year-over-year declines. The index has not experienced a trend like that since January 2010 in the midst of the Great Recession. “In a further demonstration of caution in business spending, U.S. small business once again pulled back on investment in June,” says William Phelan, president of PayNet, Inc. “Small businesses currently lack the drive to invest to create more goods and services.”

The Small Business Lending Index is a leading predictor of U.S. gross domestic product (GDP) one to two quarters out, as business loan borrowing indicates growth and small business hiring accounts for a great deal of typical economic expansion. The economy grew by just 1.2 percent in the latest quarter and by only 0.8 percent in the first quarter. The increase in the Index should point to at least a small increase in GDP in the next few quarters.

Some economic sectors are doing better than others, of course. Small businesses in the construction industry increased their loan borrowing by 8 percent in June, while those in the Arts, Entertainment, & Recreation field upped their investments by 8.1 percent. Also Administrative, Support, Waste Management and Remediation Services borrowing rose by 5.96 percent.

On the flip side, Agriculture, Forestry, Fishing and Hunting posted the biggest decrease in business loan borrowing, falling 14.2 percent. Mining, Quarrying, and Oil & Gas Extraction borrowing sank 13.5 percent while Accomodation & Food Services decreased their investments by 8.7 percent.

About Amber Nelson
Amber Nelson is a seasoned mortgage industry writer and a regular contributor to and

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