U.S. Small Business Investment Declines, Delinquency Increases

The July 2016 data release of the Thomson Reuters/PayNet Small Business Lending Index (SBLI), which is an economic indicator of GDP, decreased to 121.5 in July from 139.2 in June. Compared to the same month one year ago, the SBLI is down 16%, the largest decrease since October 2009.

July’s small business credit trends show increased financial stress. The Thomson Reuters/PayNet Small Business Delinquency Index (SBDI) 31 to 90 days past due increased six basis points from 1.27% in June 2016 to 1.33% in July, which is its highest level since December 2012. Compared to one year ago, delinquency increased by 13 bps, the largest year-over-year increase since December 2009.

Transportation delinquency is up 14 bps to 1.81%, its 17th consecutive month of increase and its highest level since September 2011. Every other segment increased by at least 3 bps from June 2016.

“While July trends are not as bad as they appear at first glance, the cumulative effect from the last few month’s data is small business are becoming increasingly bearish on the economy,” said William Phelan, president of PayNet.

“It’s too early to call a change in the business cycle change, but the collective wisdom of millions of small business owners is to hold off on borrowing and investing in their businesses,” Phelan added. “This all means greater risk for the underlying credits and most likely rising defaults of private companies over the next 12 months.”

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Terry Mulreany
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