U.S. Small Businesses Poised for Continued Expansion in Early 2019
CHICAGO – (Jan. 14, 2019) – Small business lending remained strong in November according to PayNet, the leading provider of small business credit data and analysis. The PayNet Small Business Lending Index (SBLI) edged down 1.4% to 145.6 in November 2018, but the index remained in the top 3% of all historical readings. On an annual basis, the index rose 5.2% in November, its 14th consecutive year-over-year increase. The SBLI three-month moving average also fell slightly on a monthly basis, but remains 6.4% above its year-ago level.
“Growth on Main Street remains healthy. Small businesses are less exposed to trade war risks and a potential slowdown in global overseas markets and are planning for continued expansion heading into 2019,” said PayNet, Inc. President William Phelan. “Main Street credit conditions remain strong, and we expect lenders to stay focused on supporting domestic companies and markets.”
For the major industries, monthly lending growth was mixed in November, with 10 industries experiencing declines and eight seeing increases. Notably, the lending indices for both Transportation & Warehousing and Arts, Entertainment, & Recreation reached all-time highs. On an annual basis, most industries posted gains, led by Transportation & Warehousing (+20% Y/Y) and Mining (+13% Y/Y), though lending in Accommodation & Food Services (-16% Y/Y) fell to its lowest level in nearly five years. Regionally, lending declined in four of the 10 largest states on a monthly basis but increased across all 10 of the largest states compared to year-ago levels. Lending reached record highs in Illinois (+12% Y/Y), Texas (+11% Y/Y), and Pennsylvania (+9.8% Y/Y), while lending in Florida (+11% Y/Y) rose at its fastest annual pace since April 2015.
Delinquencies and Defaults
The PayNet Small Business Delinquency Index (SBDI) showing loans 31-90 days past due increased three basis points to 1.45% in November 2018 and is up 10 basis points year-over-year. Compared to October, delinquencies increased across most major industries in November, led by Retail (+6bp M/M), Construction (+4bp M/M), and Transportation (+3bp M/M). On an annual basis, delinquencies continued to climb in most major industries, with Transportation & Warehousing (-11bp Y/Y) remaining the most notable exception. Delinquencies rose in all 10 of the largest states on a monthly basis, and eight of the 10 largest states saw delinquencies increase compared to year-ago levels, including Florida (+18bp Y/Y), Georgia (+15bp Y/Y), and Ohio (+12bp Y/Y).
The PayNet Small Business Default Index (SBDFI) held steady at 1.83% in November and remains unchanged from its year-ago level. On an annual basis, defaults fell in the majority of industries in November, and current default rates remain in the bottom half of historical levels for all industries except Information. Half of the 10 largest states saw defaults fall compared to year-ago levels, with double-digit declines in Michigan (-26bp Y/Y), Texas (-21bp Y/Y), and Pennsylvania (-13bp Y/Y). However, defaults in North Carolina (+28bp Y/Y) saw the sharpest increase on an annual basis since January 2017, and defaults in Ohio (+16bp Y/Y) climbed to the highest level in over six years.
Main Street Outlook
“Main Street businesses are keyed into current economic conditions which appear likely to remain positive for at least the first half of 2019,” said Phelan. “Though we’re starting to see financial stress tick up as federal interest rates rise, small business credit conditions remain generally healthy, and sustained confidence on Main Street should continue to carry small business investment in the coming quarter.”
PayNet helps commercial lenders make better decisions. We provide relevant, on-demand, and secure private company credit assessments. Our proprietary information and insights improve profitability, increase access to capital for Main Street, and help build a stronger global economy. For more information, visit paynet.com.
PayNet Small Business Lending Index (SBLI)
The Small Business Lending Index (SBLI) is based on new commercial loan and lease originations by major U.S. lenders in PayNet’s proprietary database. This index measures the volume of loans to small businesses normalized to January 2005. Small businesses generally respond to changes in economic conditions more rapidly than do larger businesses, so this statistic is a leading indicator of the economy and predicts changes in GDP between 2-5 months.
PayNet Small Business Delinquency Index (SBDI)
The Small Business Delinquency Index (SBDI) measures the financial stress of small businesses with $1mm or less in credit outstanding.
PayNet Small Business Default Index (SBDFI)
The PayNet Small Business Default Index (SBDFI) measures small business defaults and signals insolvency across multiple sectors of the economy at the national, state and industry levels. Default is a point-in-time measurement of borrowers that have failed to remain current and as such is a vital piece of information to assess risk exposure and evaluate the health of the overall economy.