The Thomson Reuters/PayNet Small Business Lending Index is reporting small business lending is on the rise. The November 2017 Small Business Lending Index rose 4.1 percent to 138.7, and compared to 2016, it was up more than 7 percent.
November 2017 Small Business Lending Index
The Small Business Lending Index measures the number of small business loans issued over the past 30 days. The index also includes data on which industry sectors are seeing the highest number of lending increases, along with approval, delinquency and default rates.
Economic conditions affect small businesses much faster than they do large enterprises. By measuring new commercial loans and leases to small businesses, the Small Business Lending Index provides early warning signals by gauging small business financial stress and default risk. The index is an indicator of the US GDP by 2 to 5 months, showing where the economy stands in the business cycle.
The index is used by the US commercial credit industry as a risk management tool and market insight, but the information is applicable to anyone looking to get insights into the U.S. economy.
The higher economic indicators being reported now also translate to more loans being approved. PayNet President William Phelan said in a press release, small businesses can take advantage of the current economic climate and expand through responsible borrowing.
He added, “The economy appears to be firing on all cylinders, and the stock market surge shows that large public companies have been taking advantage of the pro-business environment. Now, small businesses are stepping in to get a piece of the pie.”
Takeaways From the Small Business Lending Index
Over the last 12 months, 11 of 18 industry sectors have seen lending increases, with seven of those experiencing growth of more than four percent. The construction industry is reporting an 11-month consecutive growth, ending November up by 5.3 percent. The only two sectors to experience lower numbers were healthcare and financial insurance, which were down by 8.8 and 3.6 percent respectively.
The index also incorporates numbers from the Thomson Reuters/PayNet Small Business Delinquency Index and the PayNet Small Business Default Index, which are key to identifying how small businesses are performing.
The Small Business Delinquency Index showed businesses past due on lending payments for 31-90 days at 1.4 percent from October to November, with the transportation sector reporting a decline of nine basis points. All other sectors, however, remained relatively unchanged.
The Small Business Default Index fell to 1.8 percent in November, with only five of the 18 industrial sectors experiencing higher default numbers.
The Benefit of Small Business Loan Analysis
Small businesses account for around 50 percent of the US GDP. And with 28 million such businesses in the country, how and when they ask for loans, as well as their approval, delinquency and default rates play a very important role in the overall economy.
The Thomson Reuters/PayNet Small Business Lending Index represents the largest collection of commercial loan and lease data for small businesses. Owners can identify trends in their industry and make highly-informed decisions before making a move. With this information, a business can see the best time to expand and ask for financing from the lender more likely to approve the loan. This includes real-time PayNet loan information from more than 325 leading U.S. lenders.