Small business lending edged down in April but remains near historic highs, according to the latest Strategic Insights Report from PayNet The Thomson Reuters / PayNet Small Business Lending Index (SBLI) fell 3.5 points to 141.7 in April, but remains in the top 5 percent of all readings and is up nearly 13 percent over the last 12 months. The SBLI three-month moving average also declined slightly but is still 11 percent above its year-ago level.

“We’ve seen small business lending really start to take off this year, and we don’t see things slowing down anytime soon,” said William Phelan, president of PayNet, Inc. “Main Street businesses are taking advantage of the strong economic climate and steady consumer demand, so we expect that robust lending to small businesses will continue as they look to expand by investing in equipment, employees, and innovation.”

Most large industries saw lending expand in April with year-over-year increases, led by mining (14 percent, transportation & warehousing (13.1 percent) and construction (7.8 percent). Notably, lending in the manufacturing industry increased on an annual basis for the third consecutive month after falling consistently for a year. Lending to small businesses in service industries was mixed, and several sectors declined year-over-year, including Information (-11.4 percent), accommodation & food services (-6.1 percent) and professional services (-2.6 percent).

Regionally, all 10 of the largest states saw lending increase on both a monthly and annual basis in April, with North Carolina (12.4 percent year over year) and Texas (11.5 percent year over year) posting double-digit gains.

Small business financial stress eased in April, reversing the trend of steady increases in recent months. The Thomson Reuters / PayNet Small Business Delinquency Index (SBDI) 31–90 Days Past Due moderated to 1.41 percent in April, the first monthly decline since August 2017, but remains five basis points above its year-ago level. All 10 of the largest states experienced fewer delinquencies, though delinquencies in most large states are still above levels from a year ago, with the exception of Michigan (-6 basis points Y/Y) and North Carolina (-4 bp Y/Y). Similarly, delinquencies declined or were unchanged on a monthly basis for most major industries, but rose on an annual basis with the exception of Transportation (-50 bp Y/Y).

The PayNet Small Business Default Index (SBDFI) fell three basis points to 1.83 percent in April and is down six basis points compared to a year ago, matching its lowest level since October 2016. On an annual basis, roughly half of the major industries saw declines in April, led by mining (-218 bp), transportation & warehousing (-114 bp) and professional services (-32 bp). Meanwhile, defaults in the Information industry continued to climb (+92 bp Y/Y), reaching the highest level in nearly six years. Regionally, defaults fell in seven of the 10 largest states compared to the previous month, but rose in half of the largest states on an annual basis.

“Part of the strength in the current small business lending boom is that although credit risk is slowly rising, it remains quite low in most industries,” added Phelan. “Over the next year or two, we expect delinquencies and defaults to continue to tick up and return to more normal levels. But for now, the small business sector has the wind at its back, which should provide a big lift to US GDP over the next 2-5 months.”