US Small Businesses Slash Borrowing for 2nd Month in a Row

Small businesses in the United States cut their borrowing in February for the second month in a row. This is an indicator of slower growth in the next couple of months even as other economic reports showed recovery picked up in the first quarter of the year. Small Businesses

The Thomson Reuters/PayNet Small Business Lending Index that measures the total volume of financing to small US companies, dropped to 101.3 from a revised reading of 111.7 in January. PayNet’s lending index compares the overall economic growth one or two quarters in the future.

Last September, the US Federal Reserve pushed down long term borrowing costs via a third round of asset purchases. It pledged to keep buying until the labor market improves. The stimulus program with the near zero short-term interest rates have done little to help smaller US companies expand.

The data showed a different view to the generally positive indicators from the broader economy, which included an increase in consumer spending and sentiment. Factories also showed some signs of strength.

Small business borrowing increased 2 percent from last year. This was its slowest year-on-year increase since September. PayNet initially reported its index in January to be 113.1.

There are other signs that financial stress is building. Trucking companies are finding it difficult to pay back their loans. Delinquencies of 31 to 180 days among warehouses and transportation service companies increased to 1.85 percent in February, which is up from an all-time low of 1.55 percent last August. Delinquencies in other sectors dropped. As a whole, accounts overdue by one to six months fell to 1.58 percent from 1.62 percent of all loans made. These are signs that should make people worries about the economy.

PayNet gets real-time loan information from more than 250 leading US lenders. Data include delinquencies and originations.