PayNet reports that the growth of borrowing among small U.S. businesses moderated in September, 2011, but the overall level still registered a 14th monthly double-digit increase in a fresh sign the economy is set to grow at a stable pace.

The Thomson Reuters/PayNet Small Business Lending Index, which measures the overall volume of financing to U.S. small businesses, rose 14%, after increasing a revised 18% in August

Increased borrowing by small businesses points to better times for the broader economy because small firms account for the lion's share of new hiring. Companies use loans to buy equipment, and they need people to operate that equipment.

"We're entering this slow-growth, low-risk phase of the business cycle," PayNet president, William Phelan. "The last time, that phase lasted four to six quarters."
PayNet tracks borrowing by millions of small U.S. businesses, which cut back dramatically on borrowing in 2008 and 2009 but are now back to borrowing at levels close to those registered in 2005.

“The small business economy has been slowly coming out of the recession, but the landscape is still very challenging for small businesses. There is wavering confidence in the strength of the recovery and cautious small business investment,” Phelan added.

Meanwhile, a drop in delinquencies to a record low suggests companies are in better financial health, PayNet data shows. September marks the fourth consecutive month in which a new record low delinquency level has been reached, for the time period from January 2005 to-date.

Accounts 90 days or more behind in payment, or in severe delinquency, fell to 0.41 percent in September, a record, from 0.46 percent in August.

Accounts in moderate delinquency, or those behind by 30 days or more, fell to 1.63 percent from 1.67 percent in August, PayNet said.

Accounts behind 180 days or more, or in default and unlikely to ever get paid, fell to 0.65 percent of total receivables in September, from 0.68 percent in August, according to PayNet.

The Thomson Reuters/PayNet small business lending index is correlated to developments in the overall economy, with changes in the index preceding changes in the overall U.S. economy by two to five months. The SBLI is a powerful tool for measuring what is really going on in the economy.  The small business economy is showing underlying strength not reported in the stock market through this quantifiable information.