Smart Borrower Blog

Small Business Lending Fell 9.7% in December


Mar 6th, 2019 @ 2:49 PM by Amber Nelson


U.S. small businesses pulled back on borrowing money in December 2018, according to recent data from PayNet, perhaps a sign of lower confidence in the overall economy.

The PayNet Small Business Lending Index declined 9.7% in December from November, and 7% from the year before. That represents the first yearly decrease in more than a year, possibly signally a downward trend.

“With the three-month moving average making its fourth decrease in five months, we think there is something more substantial at play that is causing Main Street to rethink its more aggressive growth plans for this year—which we believe will have real economic impact in the next quarter,” said PayNet CEO Bill Phelan.

That “something” may have had to do with the government shutdown that started in the last week of December, but also general concern about the direction of the economy. “This data tells us that small businesses across the country started to show signs of cautiousness during the last few months of 2018,” Phelan added. “While the shutdown that began in the last week of December may have played a role in lowering confidence, small businesses likely saw gridlock coming as a result of the midterm elections and halted borrowing as a result.”

Business lending fell in seven of the top industries, with accommodation and food service posting the biggest decline. Public administration and professional, scientific and technical services also saw large drops.

A separate PayNet index indicated further weakness in the small business sector. The Small Business Delinquency Index rose 2 basis points in December and 8 basis points on a year-over-year comparison. That points to a trend of business owners slowly but consistently having a harder time keeping up with their loan payments.

While overall delinquency rates and lending numbers are still relatively healthy, the most recent survey may be foretelling a less optimistic picture of the economy.

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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