Market Overview

U.S. Small Business Lending Building Momentum

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PayNet sees investment improving as strong financial health
persists

Small business lending expanded in November, according to the latest U.S.
Small Business Credit Monthly Report
from PayNet,
the leading provider of small business credit data and analysis. The Thomson
Reuters/PayNet Small Business Lending Index
(SBLI) rose 4.1 percent
– from 133.2 (revised) in October to 138.7 in November –and now sits
more than 7 percent above year-ago levels. The SBLI 3-month moving
average also increased, and is nearly 6 percent above its November 2016
level.

From an industry perspective, 11 of 18 sectors have seen lending
increase over the last 12 months, including seven that grew by more than
4 percent. These fast-growing industries include Construction (+5.3
percent), which has experienced positive growth for 11 consecutive
months. Meanwhile, only two sectors experienced significant declines:
Healthcare (-8.8 percent); and Finance and Insurance (-3.6 percent).

"After lagging for most of the year, small business investment is
finally starting to pick up," said PayNet President William Phelan.
"Financial health remains solid, and small businesses are
well-positioned to expand through responsible borrowing."

The Thomson
Reuters/PayNet Small Business Delinquency Index
(SBDI) 31 – 90 days
past due held steady at 1.4 percent from October to November. Though the
SBDI ticked up three basis points over the past year, this modest
increase is consistent with the Federal Reserve's decision to raise the
federal funds rate three times in the 12 months leading up to November.
Compared to October, delinquencies fell nine basis points in the
Transportation sector and were essentially unchanged in other
industries, signaling continued strength in small businesses' financial
health. From a regional perspective, states affected by Hurricanes
Harvey and Irma (e.g., Florida, Georgia, Texas) should be closely
monitored in the months ahead, as these areas are already starting to
see increased delinquencies — which may eventually translate to higher
default rates.

The PayNet
Small Business Default Index
(SBDFI) fell two basis points to 1.8
percent in November. Only five of the 18 industrial sectors saw defaults
rise from October, although 10 sectors experienced higher defaults over
the last 12 months, including Information (+73bp Y/Y), Accommodation and
Food (+36bp Y/Y), and Finance and Insurance (+18bp Y/Y). However,
defaults fell substantially for Mining (-172bp Y/Y) and Professional
Services (-36bp Y/Y) over the same period, and the overall default rate
is essentially unchanged from a year ago.

"The economy appears to be firing on all cylinders, and the stock market
surge shows that large public companies have been taking advantage of
the pro-business environment," added Phelan. "Now, small businesses are
stepping in to get a piece of the pie."

About PayNet

PayNet,
Inc.
, is the leading provider of credit ratings on small businesses
enabling lenders to manage credit risk, grow earning assets and operate
credit at lower cost. PayNet maintains the largest proprietary database
of small business loans, leases and lines of credit encompassing over 23
million contracts worth over $1.5 Trillion. Using state-of-the-art
analytics, PayNet converts raw data into real-time marketing
intelligence and predictive information that subscribing lenders use to
make informed small business financial decisions and improve their
business strategy. For more information visit www.paynet.com.

Thomson Reuters/PayNet Small Business Lending
Index (SBLI)

The Small Business Lending Index (SBLI) is based on new commercial loan
and lease originations by major U.S. lenders in PayNet's proprietary
database. This index measures the volume of loans to small businesses
normalized to January 2005. Small businesses generally respond to
changes in economic conditions more rapidly than do larger businesses,
so this statistic is a leading indicator of the economy and predicts
changes in GDP between 2-5 months.

Thomson Reuters/PayNet Small Business
Delinquency Index (SBDI)

The Small Business Delinquency Index (SBDI) is designed to gauge small
business financial stress at the national and state levels, including
industry segmentation. The SBDI provides insight to financial services
executives, economists, policy makers and regulators in order to
understand the stage of the business cycle and to set credit oversight
policies.

PayNet Small Business Default Index (SBDFI)

The Small Business Default Index (SBDFI) measures small business
defaults and signals insolvency across multiple sectors of the economy
at the national, state and industry levels. Default is a point-in-time
measurement of borrowers that have failed to remain current and as such
is a vital piece of information to assess risk exposure and evaluate the
health of the overall economy.

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