Main Street Business Borrowing Slows 9.7% in December

December 2018 Small Business Lending Index

Small business lending decreased by 9.7 percent in December 2018, according to recent data from lending solutions provider PayNet.

December 2018 Small Business Lending Index

This could be an indication of small business confidence slowing as we enter 2019. Small business lending is often used as a gauge of economic health and confidence. So any slowdown in those rates is not a great sign for the economy.

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There are several likely reasons why this shift may have happened in December. PayNet points out that the recent U.S. government shutdown that started late in December was probably part of it. However, the company does believe that there are other factors at play as well.

Bill Phelan, CEO of PayNet, said in an email to Small Business Trends, “This data tells us that small businesses across the country started to show signs of cautiousness during the last few months of 2018. 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.”

In addition to the lending slowdown between November and December, PayNet’s Small Business Lending Index also fell 7 percent from December 2017 and December 2018, which represents the first year-over-year decline since September 2017. So this is part of a larger declining trend, rather than a simple outlier that represents one troubling month.

Phelan adds, “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.”

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More specifically, PayNet found that lending slowed in seven of the top industries, with the biggest declines in accommodation and food service, public administration and professional, scientific and technical services.

In addition, PayNet’s Small Business Delinquency Index rose by 2 basis points in December, with a jump of 8 basis points in a year-over-year basis. Basically, this shows that there has been a small but steady increase in the number of small businesses that are unable to make loan payments on time.

Overall, small business confidence and overall economic health remain relatively high. But these findings do display some potentially troubling trends. Small businesses aren’t necessarily feeling as confident in their ability to grow and obtain financing that they’ll be able to pay back in a timely fashion. PayNet believes this will start to make an impact on the economy as a whole in fairly short order.



Annie Pilon Annie Pilon is a Senior Staff Writer for Small Business Trends, covering entrepreneur profiles, interviews, feature stories, community news and in-depth, expert-based guides. When she’s not writing she can be found exploring all that her home state of Michigan has to offer.

3 Reactions
  1. I guess it will be because of that December boost in revenue so businesses don’t really need to borrow.

  2. Interesting information. Based on the information in this article, we may see some major changes towards the end of 2019 or early 2020. The US economy has been on upward trend. Market cycles have shown that there is a recession every 10 to 15 years. Maybe, these are the first signs to watch.