Despite an incessant buzz indicating that small businesses can’t get loans, borrowing by small businesses actually rose slightly in July, according to data released today by PayNet Inc., Reuters reported.
The Thomson Reuters/PayNet Small Business Lending Index, which measures the overall volume of financing to U.S. small businesses, rose 2 percent in July from a year earlier, PayNet said.
Business borrowing remains at historically low levels as high unemployment keeps down consumer demand and firms delay making new capital investments , said William Phelan, PayNet's president and founder.
"We've stalled or are stalling as an economy," Phelan told Reuters. While lenders are willing to extend credit, businesses don't want to borrow, he said: "Loan demand is very weak."
Separate PayNet data showed fewer companies are falling behind on existing loan repayments, suggesting the economy is not in imminent danger of falling back into recession, Phelan said.
"I'd be much more bearish if we weren't seeing delinquencies improving," Phelan said.
The Thomson Reuters/PayNet small business lending index is correlated to developments in the overall economy, with changes in the index preceding changes in the overall U.S. economy by two to five months.