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Small Business Borrowing Points To Stable Economic Growth

Written by Ken Gaebler
Published: 11/2/2011

Borrowing among small businesses continues to rise, reinforcing the notion that the U.S. economy is experiencing slow and sustained economic growth.

Small business borrowing rose 14% in September according to the Thomson Reuters/PayNet Small Business Lending Index, an index that measures the monthly volume of financing to U.S. small businesses.

Small Business Borrowing

Although September SMB lending growth is slightly lower than the 18% growth rate reported for August, Reuters reports that persistent double-digit gains are an indication that the national economy is set to grow at a stable pace.

Historical lending data shows that small businesses dramatically cut back their borrowing during the recession in 2008 and 2009. However, current figures reveal that small business borrowing has rebounded to 2005 levels.

At the same time, loan delinquencies among small businesses are at a record low, indicating the overall financial health and vitality of the small business sector.

"We're entering this slow-growth, low-risk phase of the business cycle," says PayNet founder Bill Phelan. "The last time, that phase lasted four to six quarters."

The rise in small business borrowing is also seen as a positive sign for the U.S. labor market since loan proceeds are used to buy equipment, which in many cases, needs to be operated by additional hires.

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