Bank lending to small businesses hit the lowest level in 14 months in September, according to a report by Thomas Reuters and PayNet.
“It’s not a positive report,” PayNet founder Bill Phelan told Reuters. “It's unlikely you are going to get a lot of growth (from small businesses)."
The overall volume of financing to small businesses in September was 94.1 as recorded in the Thomson Reuters/Pay Net Small Business Lending Index, down from 108.9 in August. The index uses a scale based on collected loan information such as originations and delinquencies from more than 250 U.S. lenders. The index’s record high was in December 2006, at just over 130.
The lending index typically correlates to economic growth one or two quarters in the future, according to PayNet.
The U.S. Federal Reserve launched a new stimulus round of bond buybacks on September 13 meant to encourage bank lending and business spending in the coming months.
Alternatively, many smaller banks are still eager to provide loans to small businesses. Business owners in need of financings should also consider alternatives such as factoring or a merchant cash advance, which can also provide the needed funds without the hassles that come with the bank.