The January 2016 Thomson Reuters/PayNet Small Business Lending Index (SBLI) registered 118.2, 13% lower than the revised December value of 135. Compared to one year ago, the index decreased 3% from the January 2015 value of 122.4.

“Small businesses don’t like these business conditions so they’re hunkering down further,” said William Phelan, president of PayNet.

The sharp decline in small business lending shows a trend towards less optimism among small businesses. Three of the past four months have exhibited flat to lower investment as U.S. small businesses held cash rather than put it to work.

The health of business financials stands strong but is starting to show some signs of erosion. The Thomson Reuters/PayNet Small Business Delinquency Index increased two basis points in January to 1.22%.

Loan past dues were up or flat in all industry sectors in January, including construction, which increased seven basis points. While good now, the underlying sectors most sensitive to economic inflections are starting to exhibit stress through higher loan past dues. Transportation companies show loans 30-91 days past due up five basis points to 1.21%, the 11th consecutive month of increase and its highest level since May 2013.

“This release confirms the past few months are no fluke,” said Phelan. “We will be watching for upcoming releases on investment and delinquencies for more definitive views of the business and credit cycles.”