By: Julie Story
Small businesses may be feeling more confident about the state of the economy, and lenders may be feeling less shaky about extending financing as small business lending increased in August.
According to the results of the Thomson Reuters PayNet Small Business index, lending increased 3 percent in August, marking the second consecutive month that the index has improved. The index increased to 109.9 in August from 106 in July. Reuters notes that August lending figures reached their highest level so far this year, and borrowing increased 10 percent from this point last year. The criteria used to measure the index includes the number of new commercial loans issued to small businesses as well as new leases granted to companies.
"We've got a winning streak going," PayNet founder Bill Phelan told Reuters. "These business owners are looking out three, to six, to nine months, and they are seeing some positive profit-producing opportunities: there must be something these business owners are seeing."
The data signals good news for the overall economy, as small businesses employ the majority of the country's workforce and have been struggling to bounce back since the recession hit. While community banks and credit unions have continued to extend small business banking products to companies, many Wall Street banks tightened lending criteria to lower their exposure to risk. This significantly limited the amount of credit access many companies were depending on, and has frequently been cited as a central reason economic recovery has been stunted. Credit unions are currently lobbying to raise their lending cap from its current 12.25 percent of total assets to 27.5 percent as a strategy for opening more capital to businesses and jumpstarting the economy.