Small Business Borrowing Hits 2 Year High

June 17 small biz lending indexBorrowing by small U.S. companies hit a nearly two-year high in June, driven by restaurants and hotels, PayNet Inc said on Tuesday, as businesses invested to meet customer demand.  The Thomson Reuters/PayNet Small Business Lending Index for June rose to 139.9, its highest since July 2015, from an upwardly revised May reading of 138.3.

Small business borrowing is a key barometer of growth because those companies do much of the hiring that drives economic gains.  Still, measured from a year earlier, borrowing was flat, according to the provider of credit ratings on small companies.

“It really tells me they are still seeing a lot of uncertainty from policy,” said PayNet founder and Chief Executive Bill Phelan, referring to the lack of annual growth in borrowing. “If you don’t know what policies are going to be, you are not going to put money to work.”

Turmoil in Washington surrounding U.S. President’s Donald Trump’s 6-month-old administration has led investors and businesses to question whether many his proposals will be implemented. Last week Republicans failed to deliver on a campaign promise to overhaul the U.S. healthcare system, and Trump on Monday fired his communications director after just a week on the job.

Borrowing by firms providing food and accommodation rose 5.5% from a year earlier, Phelan said. But that growth was offset by declines in other sectors, including a 12% drop by healthcare-related companies.  Movements in the index typically correspond with changes in gross domestic product growth a quarter or two ahead. The U.S. economy grew at a 2.6% annual pace in the second quarter, more than double the 1.2% growth in the first quarter, though wage growth has continued to be sluggish.

A separate barometer of small companies’ financial health suggested companies are finding it easier to pay off old loans. The share of loans more than 30 days past due was 1.67% in June, down from 1.69% a month earlier, PayNet data showed.

Source: Fiscal Times