Small business lending contracts, employment expands in July

Jessica SarterSmall Business Lending

Several of the most recently released reports regarding the small business sector have revealed slowed expansion, and even contraction in some areas. As a result, small business lending has been among the top concerns of many industry advocates, as well as the subject of many studies and surveys.

However, the most accurate view of something as complex as the national economy can only be seen through a very wide lens. Different organizations use varying research methodologies to arrive at their findings, and entrepreneurs need to view each of these reports as pieces of a whole, with the understanding that the true state of affairs in the sector is never black and white.

The most recent Thomson Reuters/PayNet Small Business Lending Index revealed a decrease of loan disbursement volumes in June, representing the lowest numbers since October 2011, Reuters reports. The index dropped from 103.8 in May to 98.5 in June, according to PayNet data, while this is the fifth drop in six months.

PayNet founder Bill Phelan viewed the drop in the index as a sign for the worst.

“Small businesses really took a dive,” he explained, according to Reuters. “What this means is, the slowdown is going to continue.”

Reuters purported that this might have had some correlation with happenings in the Federal Reserve, which had been discussing the prospect of more stimulus spending to improve employment and continued low interest rates on federal funds.

Fed officials came to a decision at a Federal Open Market Committee meeting this week, though, regarding these matters.

The Fed decided to leave its monetary policy largely unchanged, and continue pushing low interest rates on federal funds and other economic stimulus initiatives. The report from the committee included a projection of continued gradual growth, as well as data that implied continued drops in inflation.

Reuters added that PayNet data showed a continued downward trend of accounts past due in the small business sector, as those that registered 30 days behind fell to the lowest levels since the firm started gathering the data seven years ago. This data implies that small businesses are better equipped to pay off debts in recent months than other periods following the recession.

While PayNet cited a “a real dive” in the sector, other reports reveal the exact opposite.

This includes the most recent ADP National Employment Report from Automatic Data Processing and Macroeconomic Advisers, which showed nonfarm private employment expanded by 163,000 net jobs from June to July. This was the second straight month of solid growth, as the firms found an increase of 172,000 jobs from May to June.

Last month, small businesses created the most jobs – more than three times as many as large businesses, with 73,000 net jobs added, according to the report. Mid-sized business employment increased by 67,000 jobs.

Further, the construction sector saw employment improvements for the second straight month, while financial services employment has now increased every month for the last year. On a broader scale, the firms noted that 148,000 of the new jobs were in the private, service-providing sector, which marks the second straight month of health gains.

The Reuters/PayNet index did not include information on whether the drop occurred from a decrease in loan applications or dropped availability of financing. Notably, many other reports have shown that small business loan availability has improved significantly this year.

If you need to acquire financing for your small business, consider using a service like BoeFly. This firm, which has thousands of participating lenders, uses complex algorithms to match you with the financial institution best suited to your business’ needs.