US SMBs Are Borrowing Less — Is That Good Or Bad?

The overall amount that small businesses in the United States borrowed slipped for the second straight month in November, reported Reuters on Tuesday (Jan. 5).

The numbers for the month’s Thomson Reuters/PayNet Small Business Lending Index came in at 127.4, which was down from 129.9 in October (that latter number was revised downward when the November data was released). The latest tally was the lowest reading that has been seen since February.

The newswire said that the reading gives some credence to the thought that economic growth may start to sag a bit, especially in the wake of interest rate hikes from the Federal Reserve, which came last month and represented the first boosts in roughly a decade.

[bctt tweet=”The reading gives some credence to the thought that economic growth may start to sag a bit.”]

In a statement discussing the latest results, PayNet President Bill Phelan said: “Small business has suddenly decided to hold off on investment to produce more goods and services.”

The newswire projected that small business owners may be waiting to judge the impact of a confluence of factors, ranging from the aforementioned rate hikes to the economic slowdown that is bedeviling nations overseas and even how politics may progress in this presidential election year, before putting money toward new projects.

The index peaked in June 2015, with a leading effect that Reuters said historically has foreshadowed gross domestic product trends in the United States by as many as five months and as few as two months. As has been widely reported by various news sources, the nation’s economy grew at roughly a 2.1 percent pace, as measured by the latest quarterly reading, but the pace is likely to fall below a 1 percent growth rate to as low as 0.7 percent, the Atlanta Fed has estimated.

There are many reasons that SMBs may not borrow, including the health of their business has improved as the economy’s prospects have strengthened. The PYMNTS StoreFront Business Index done in collaboration with CAN Capital, shows a different picture of those small businesses that typical the “main street” businesses in the U.S. The Index, which measures the vitality of those businesses, looks at factors such as expansion, revenue growth and openings. This Index shows a healthy StoreFront sector, even out performing GDP slightly.