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Indicators point to slowdown in small business lending activity

Small business lending activity across the U.S. hit its lowest level in 14 months in September, according to a Nov. 1 report issued by Thomson Reuters and PayNet Inc.

The Thomson Reuters/PayNet Small Business Lending Index, which comprises input from more than 250 U.S. lenders, fell by more than 13 percent to 94.1 in September from 108.9 in August.

Prior to the steep drop in September, the index had increased in three of the previous four months.

A separate report released by Thomson Reuters and PayNet Nov. 1 in conjunction with the Small Business Lending Index showed companies were under increasing financial pressures.

In September, accounts overdue by 30 days rose to 1.24 percent of the total accounts surveyed by PayNet, a Skokie, Ill.-based risk management and market analysis firm. In August, 1.18 percent of all accounts surveyed by PayNet were overdue by 30 days.

On a positive note, longer-term delinquency rates decreased, according to the report.

Accounts behind in payments by 90 days or more fell to 0.23 percent from 0.25 percent in August, while accounts behind by 180 days or more fell to 0.32 percent from 0.33 percent the previous month.

Thomson Reuters is based in New York City and has corporate offices in Stamford’s Metro Center.

Similarly, the National Federation of Independent Business (NFIB) Small Business Optimism Index for September fell a tenth of a point to 92.8, as fewer businesses that were surveyed said they planned to hire, and more firms reported decreases in employment than those that reported staffing increases.

NFIB Chief Economist William Dunkelberg attributed the drop in confidence to a general apprehension surrounding the elections and the upcoming lame-duck session.

“Everyone is waiting to see what happens, especially small business owners who have a lot at stake in the outcome, which could mean higher marginal tax rates and more deficits or lower marginal tax rates and less government,” Dunkelberg wrote in the NFIB report.

The NFIB report showed minimal lending activity, with most business owners surveyed saying they had no interest in a loan.

Only 8 percent of those surveyed said they didn’t get all the credit they were seeking, and just 2 percent said credit is their top business problem, versus more than 60 percent who cited taxes, regulations and red tape, or poor sales as their most pressing issue.

The report noted a “substantial reduction in capital spending activity,” as the number of business owners planning capital outlays in the next three to six months fell three percentage points to 21 percent.

Of those business owners who were surveyed, 10 percent reported they hired new workers, 13 percent said they cut staff and the remaining 77 percent saw no net change in employment.

The companies that reported they increased their staffs added an average of 2.2 workers per firm, while the companies that reported cutting staff reduced employment by an average of three workers per firm.

“Small business owners are reporting that the political climate is a reason not to expand – second only to the economy, which is only keeping up with population growth,” Dunkelberg wrote. “And so, in the meantime, owners are in maintenance mode, spending only where necessary and not hiring, expanding or ordering more inventories until the future becomes more ‘certain.’”

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