Small Business Investment Contracting, Financial Health Remains Strong



According to the September 2017 Thomson Reuters/PayNet Small Business Lending Index, small business monthly credit trends reflect a wait and see attitude. The index decreased 4% to 127.3 in September compared to the 133.2 August reading. On a year-over-year basis, the index was down 2%.

Only four major sectors registered positive increases with accommodation and food, administration, construction and wholesale up materially. In a positive sign, health care, retail and transportation are showing increased investment over the past quarter which bodes well for these sectors.

“While the majority of industry sectors showed decreases compared to last year, the overall trend line remains unchanged, indicating this wait and see attitude among small businesses,” said William Phelan, president of PayNet. “Financial health continues at above average quality. Small businesses are not venturing out on a financial limb at this time.”

The Thomson Reuters/PayNet Small Business Delinquency Index (SBDI) 31 to 90 days past due increased to 1.35% in September 2017 from 1.33% in August 2017. Compared to one year ago, the index increased three basis points. Every month in the past year and a half has been up, however the year-over-year increase had been declining for the last five months, whereas in September it increased slightly.

Transportation and agriculture delinquency decreased seven basis points and two basis points, respectively, while investment in these two sectors are finally starting to creep into positive territory. The remaining segments showed delinquency increases of one to two basis points.

The PayNet Small Business Default Index (SBDFI) ticked up one basis point in September to 1.86%, and there are signs that the negative impact of Hurricane Harvey is starting to materialize. After many months of relatively rapid declines in default rates, defaults ticked up in the western part of the South, especially Texas, which increased from 2.91% to 2.96%.

“Small business is not in expansionary mode probably because they are not sure about the direction of important policies like taxes,” Phelan said. “It’s going to take some serious clarity to get small business to come to life again and start to invest.”


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Terry Mulreany
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