US business loan defaults rise again

Tuesday, January 05, 2010
CHICAGO: Severe delinquencies by small and medium-sized US businesses on the loans, leases and lines of credit to finance capital equipment rose again in November as lenders remained reluctant to extend fresh financing, PayNet Inc reported on Monday.

Accounts behind 180 days or more, and unlikely ever to be paid, rose to 0.91 per cent in November from 0.87 per cent in October, according to PayNet, which provides risk-management tools to the commercial lending industry. It was the 22nd consecutive monthly increase in loans so far in arrears they ultimately may have to be written off by lenders.

Accounts in moderate delinquency, or those behind by 30 days or more, rose in November to 4.33 per cent from 4.19 per cent in October, according to PayNet.

That ended a three-month stretch where moderate delinquencies had fallen, a trend that fuelled hopes prospects were improving for small businesses, which led the broader economy into the past two recessions and are widely regarded as the best hope for job creation in any recovery.

But accounts 90 days or more behind in payment, or in severe delinquency, improved modestly in November, slipping to 1.40 per cent from 1.43 per cent in October. It was the fourth consecutive improvement in the measurement.

That was not the only glimmer of light in PayNet’s monthly report. The company’s Small Business Lending Index, which measures the overall volume of financing, fell just 11 per cent year-over-year in November. While that indicates that lenders remain reluctant to extend credit to small and medium-sized businesses, it was the smallest decline in the index since the recession began. “We’re not out of this slump yet,” said Bill Phelan, president and founder of Skokie, Illinois-based PayNet.