Small Business Lending Levels Signal a Strong Third Quarter of Growth

Small Business Lending Levels Signal a Strong Third Quarter of Growth

The June small business lending figures were relatively poor, yet the latest Thomson Reuters/PayNet Small Business Lending Index figures suggest that lending is improving. The 10% rise over the course of the month of July suggest that small business owners are more confident and are now even looking at expanding operations.

The small business lending figures are positive but credit risk is still at an historic low. The lending environment is improving, but bad credit business loans are still very difficult to obtain and companies that are unable to demonstrate solid accounts for the previous two years are still struggling to obtain the finance they desperately need. Traditional lending institutions are still saying no, although a positive is that alternate lenders are happy to provide operating working capital loans and non-secured finance to make up the shortfall. New small business loans are similarly difficult to obtain without any credit history to rely on and the banks are clearly apprehensive about establishing credit lines and making loans available.

The latest figures do suggest that small business owners now have greater confidence in the economy. The level of small business loans issued in July and August indicate that it is not just business equipment loans that are being made to replace aging machinery. The level of lending suggests that small businesses are actually now expanding. This is backed up by the latest figures to be released on the number of new jobs created in the private sector in recent months.
Taking the agricultural sector figures out of the equation, the number of jobs small businesses created in July was estimated to be 218,000, with small businesses accounting for around 84,000 of these new positions according to ADP; an American provider of business outsourcing solutions.

Small business employment figures have been analyzed by both ADP and Moody’s. Small companies are classified into two separate sets; those with 1-19 employees and larger companies employing 20-49 staff. Figures are then extrapolated to provide an estimate of the total number of jobs created nationally. According to the July figures from ADP, larger businesses provided the most jobs – some 50,000 – while the smaller set created 34,000 new positions. The service industries were responsible for creating the most new jobs.

Figures for August show 204,000 more jobs have been created, demonstrating some consistency in the job market once again even though the August figures indicate that the current pace of job creation is now slowing. The ADP National Employment report for August suggests that 78,000 new jobs were made available in August.

Even with the slight slowing of the rate at which new job are being created, the figures are good news for economy, which has benefitted from over 200,000 new jobs per month for seven consecutive calendar months. The optimistic figure of 218,000 new jobs in July has since been downgraded to 212,000, but this figure is still healthy. Job losses were also down in August, with 40,010 layoffs in the month which is 21% lower than the same month last year, and an improvement of 15% from July 2014. Jobless claims are considerably lower and are now at pre-recession levels again. During August 164,000 new online jobs were posted according to a statement issued by the Conference Board.

Some economists have suggested that if the current trend continues, the USA will be back to full employment levels as early as the end of 2016, although such predictions are tentative at best and 2 years is a long time and much can change over the next 24 months.