Small Business Lending Posts Double-Digit Growth
Dec 5th, 2018 @ 10:27 PM by Amber Nelson
U.S. small businesses borrowed much more in October, according to a new report from PayNet, growing by double-digits from September, a sign of increased investor confidence.
The Thomson Reuters/PayNet Small Business Lending Index – a measure of total small business loan originations, rose 11% to a seasonally adjusted level of 148.2, up from 133.1 in September. It is also up 11% from one year ago.
“After a pause in September, October has proven to be a return to increased investment and improved credit risk,” said PayNet, Inc. President William Phelan. “September’s mini wake-up call brought to light the reality that good times for lenders and businesses won’t continue forever. In October, booming investment at low risk continued, but the double-digit growth we’ve seen throughout most of 2018 will taper eventually.”
The industries that experienced the most growth in business lending were Transportation & Warehousing with a 21.3% jump, Mining with a 16.0% increase and Construction with a 7.2% rise. Two market sectors even reached all-time highs in October: Transportation & Warehousing and Arts, Entertainment & Recreation.
There were some small business lending markets that declined though. Accommodation & Food Services fell 14.5%, Information dropped 7.7% and Professional, Scientific & Technical Services declined 1.2%.
At the same time, small business delinquencies and defaults fell. The Thomson Reuters/PayNet Small Business Delinquency Index slipped 0.01% to 1.41% in October, but it is slightly 0.06% higher than last year. The sectors with the biggest increase in late payments were Construction and Retail.
The Thomson Reuters/PayNet Small Business Default Index decreased to 1.81% in October, down 0.03% from September and down 0.03% from October 2017.
“Main Street America appears to be back on track with large jumps in investment at low credit risk,” Phelan said. “While sustained confidence on Main Street should carry healthy levels of small business investment into 2019, growth appears likely to slow as the year progresses given the late stage of the business cycle. Put simply, the boom times can’t continue for much longer, and a more moderate pace of investments, while not as exciting, would be more sustainable.”
Amber Nelson is a seasoned mortgage industry writer and a regular contributor to Loan.com and Mortgage101.com.