The November 2016 data release of the Thomson Reuters/PayNet Small Business Lending Index (SBLI) increased 8% to 129.9 in November 2016 from 119.8 in October 2016. Compared to November 2015, the index is up 2%, the first year-over-year increase since May 2016.
“Greater certainty about policies with the election results complete is certainly a factor,” said William Phelan, president of PayNet. “Expansion had been on hold for the better part of 2016, but it appears to be resuming the trend it carried for most of the past four years-expansion at low risk phase.”
Financial health of small businesses has steadily decreased. While the Thomson Reuters/PayNet Small Business Delinquency Index (SBDI) 31-90 days past due decreased two basis points from 1.34% in October 2016 to 1.32% in November 2016, compared to November 2015, delinquency increased by 12 basis points, marking the seventh straight month of year-over-year increases. Transportation delinquency was down four basis points to 1.83%, its first month of decrease since January 2015. Every other segment was down or flat from October 2016.
“Small business growth bodes well for future GDP and they are well positioned to add positive lift to the economy if growth policies translate into actual results,” Phelan noted.
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2 Replies to “PayNet SBLI Registers First Y/Y Increase Since May”
There is untold pent up demand for new equipment in the small business sector. Knowing that President Trump will take office and that his administration will be more pro business is a positive. The overhang is that business demand for goods still has to pick up before smaller corporations can take the leap and add new debt.
Ignoring rising delinquencies and the onset of higher long-term rates fails to paint a picture of illustrious economic growth that Trump boasts will happen. First, labor market for small business is weak, min. wage just moved higher in 19 states thus limiting small biz job creation. Second, banks are not really lending to small biz now so higher rates are not going to be anymore indicative of more lending willingness. Case in point, 20% of small biz owners have gone to online lenders. Well, the prime spread will narrow if marketplace lenders don’t jack up their rates, leaving small biz owners subject to predatory levels even more so than current standards. How does this happen? For one, marketplace lenders don’t lend a penny of their own money and don’t hold loans on their books. They use crowdfunding to get capital (~9% returns expected) or private investors (at least 9% returns needed). Cost of capital goes up for these guys limiting their ability to sell loans to investors or provide borrowing capital.
Economic growth will be stagnant going forward and likely be recession bound given the protectionist and foolish economic policies being thrown around DC. Already seeing it in labor market, energy market, bonds, emerging markets, etc. It’s getting darker down the tunnel not lighter.