Borrowing reaches three year high, banks still show trepidation

7/1/2011

According to the Thomson Reuters/PayNet Small Business Lending Index, small businesses are borrowing at their highest rate since 2008 - up 26 percent in May year-over-year, Inc. Magazine reports.

The news source adds that changes in the Index typically means the economy will follow the prevailing trend within two to five months.

"If small businesses are taking these kinds of chances, taking risks, making long terms investments, they are seeing some long-term opportunities on the horizon," PayNet founder Bill Phelan told Reuters. "That's got to be a big positive sign for the economy."

However, banks' hesitation to provide small business loans stems from the fact that they worry about companies' ability to find capital.

Inc. reports that Pepperdine finance professor Jon Paglia recently surveyed 1,221 small business owners, and found that 50 percent had attempted to obtain a loan within the last six months, but were denied by banks 60 percent of the time.

Congress has yet to filter the $30 billion in capital it claimed it would provide SBOs through the Small Business Lending Fund to community banks, a delay Treasury Secretary Tim Geithner is blaming on "banking regulators," according to the Tampa Bay Business Journal.