New data shows post-election bounce in small-business lending

New data shows post-election bounce in small-business lending



Small U.S-based firms increased their borrowing following the November election. But will their confidence hold throughout 2017?

The Thomson Reuters/PayNet Small Business Lending Index hit 129.9 in November, up from 119.8 in October, marking the first increase in six months. Changes in the index often correspond with movements in gross domestic product growth up to a quarter or two ahead of time, per the Reuters report.

Small businesses borrowing is a critical bellwether of future economic growth as small employers do a lot of the hiring that drives economic gains. But does this uptick in borrowing mean a boom time is in store for businesses? Experts are unsure.

“Right now we’ve got this post-election bounce, because we know who will be in office,” Bill Phelan, PayNet’s chief executive and founder, told Reuters. “Is this going to continue into a new era of growth or no? That’s unclear.”

The PayNet data also found that companies are having an easier time paying back existing debts. The number of loans more than 30 days past due dipped in November to 1.67 percent, the first decline in about a year.

We’ll see whether the trend holds or not, but there are other indicators that the confidence of small-to-medium sized business owners (SMB) is on the rise. According to a recent Business Journals SMB Insight study, more than 80 percent of these entrepreneurs are optimistic about the future success of their companies. That’s the highest that number has been in 10 years.

The optimistic outlook for SMB owners falls in line with a recent study of business executives at larger organizations. A survey by the American Institute of CPAs (AICPA) found that 62 percent of chief executive officers, chief financial officers, controllers and other certified public accountants at U.S. companies have an optimistic outlook for the U.S. economy for the next 12 months, up from 38 percent last quarter.

Despite the optimism, The Business Journals report also found SMB owners still have their worries. In particular, they are concerned about health insurance costs, which are expected to increase by as much as 10 percent in 2017. Almost three-quarters of these business owners pay for most or all of their employee healthcare costs.

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