Dwindling loan delinquencies at the heart of borrowing surge

7/8/2011

The Thomson Reuters/Paynet Small Business Lending Index noted in early May that small business borrowing had slowed, following news that lending dropped from 17 percent to 12 percent between February and March, according to MedCity News.

However, the percentage of small business owners with delinquent loans of 30 days or more dropped from 2.42 percent to 2.15 during that time period.

These hidden statistics proved to be a precursor of things to come, because by the end of May, small business lending had risen 26 percent year-over-year. In addition, delinquencies fell from 2.06 percent in April to 1.95 percent.

William Phelan, founder and president of PayNet, notes that entrepreneurs should expect looser credit practices from SBOs in the future, given the continual downward trend of delinquencies.

"If small businesses are taking these kind of chances, taking risks, making long-term investments, they are seeing some long-term opportunities on the horizon," Phelan said in an interview, quoted by the news source. "That's got to be a big positive sign for the economy."

Loan delinquencies are not trending in a negative direction for all sectors, however. Bloomberg recently noted that consumer loan delinquencies rose 2.71 percent in the first quarter of 2011, due primarily to high gas prices and unemployment.