The Thomson Reuters/PayNet Small Business Lending Index (SBLI), which has proven to be a leading indicator of the GDP between 2-5 months, takes the pulse of the U.S. Small Business economy. The SBLI for November stands at 108.3, which is essentially unchanged from October. The index rose only 3% over the same time last year, which is a far slower pace of increase than in 2010 (20%) and 2011 (16%).
The SBLI is the only real-time indicator to signal the one-half of GDP contributed by small business. 2012 is a lost year of investment for one-half of the US economy. In 2010 the SBLI rose 20% and in 2011 SBLI rose 16%. Small business went "On-Hold" in November; waiting to see consumer demand and issues from Washington.
According to PayNet president William Phelan, “Small businesses did not find the need to expand much in 2012. Obviously uncertainty over tax rates and costs prevailed. Overall 2012 is disappointing as the entire year has been essentially one of lower investment in productivity-enhancing projects that will generate new profits for one-half of the US economy.”
Phelan added, “When we see investing by small business owners, we’ll know the economy is really healthy. They have plenty of capital to ignite this economy but not enough has been done to create stability.”
PayNet’s Small Business Delinquency Index (SBDI) measures the financial stress of small businesses with $1MM or less in credit outstanding. The SBDI November 2012 release shows financial stress remains at business cycle lows.
Moderate loan delinquencies, those 30 days or more past due, are starting to rise. The big question is whether or not higher loan delinquencies are due to more risk taking or to increased financial stress. There has not been a lot of growth in small business investment. Higher loan delinquencies eventually mean higher defaults by small businesses. PayNet’s data quantifies that the rate of business failures will rise in 2013 to 2 out of 100 from 1.6 out of 100, but this is still well within the long-term normal range for now.
The Small Business Lending Index (SBLI) is based on new commercial loan and lease originations by major U.S. lenders in PayNet’s proprietary database. This index measures the volume of loans to small businesses normalized to January 2005. Small businesses generally respond to changes in economic conditions more rapidly than do larger businesses, so this statistic is a leading indicator of the economy and predicts changes in GDP between 2-5 months.
PayNet is the premier provider of risk management solutions which collects real-time loan information, such as originations and delinquencies, from more than 250 leading U.S. lenders. The company's proprietary database-updated weekly - is the largest collection of commercial loans & leases, encompassing more than 20 million current and historic contracts worth more than $1 trillion.