Small Business Lending Hits Record High
Aug 8th, 2018 @ 8:34 PM by Amber Nelson
“Times are unusually good for Main Street businesses and their lenders now,” said PayNet Inc. President William Phelan. “The combination of record-high credit demand and low credit risk for main street businesses signals that higher profitability is in store for commercial lenders — especially those with technology systems currently in place that can minimize costs.”
The Small Business Lending Index vaulted up 9.4% in May to 152.7, a more than 10% percent yearly increase. Lending was up in almost every state with Texas leading the way with 12.9% year-over-year increase.
Most of the various small business lending sectors saw lending increases in May, with Transportation & Warehousing jumping 15% and mining rising 9.4%. Four industries did see a decline, however and they were all in the service sector, including a 9.3% decrease for Information and 8.1% fall for lending in Accommodation & Food Services.
A separate measure – the PayNet Small Business Default Index slipped to 1.82% in May, down 2 basis points from 1.89% the previous year, the largest annual decline in four years. Defaults fell on a yearly basis for half of the ten largest states, with Texas again in the lead with its rate falling 36 basis points. On a monthly basis, default fell in eight of the ten largest states.
By sector, default were down in more than half of the industries, with Mining showing the biggest decline of 183 basis points from the year before. Transportation and Warehousing was close behind with a 133 basis point drop.
“Financial stress among small businesses remains low, especially for this stage of the business cycle,” said Phelan. “While it’s possible that credit risk may begin to creep up if the Fed continues raising rates, main street lending should continue to fill the sails of the U.S. economy.”
Amber Nelson is a seasoned mortgage industry writer and a regular contributor to Loan.com and Mortgage101.com.