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Small Business

U.S. Small Business Borrowing Rises to Six-Year High

(Reuters) – Small U.S. businesses took on more debt in July, pushing an index of borrowing to a six-year high and adding to evidence that the economic recovery is on firmer ground.

The Thomson Reuters/PayNet Small Business Lending Index, which measures the volume of financing to small companies, rose 11 percent in July to 117.7, the highest level since August 2007.

The index registered 105.7 in June, PayNet said on Wednesday, revised from an initial reading of 104.8.

Historically, PayNet’s lending index has correlated to overall economic growth one or two quarters in the future.

The stronger reading in July, up 12 percent from a year earlier, came as the Federal Reserve signaled it is prepared to begin reducing its massive stimulus program as soon as this month.

Long-term borrowing costs rose in response. But the U.S. central bank has kept short-term rates near zero, where they’ve been since December 2008, and has promised to keep them there until the labor market strengthens further. That’s helped encourage small businesses to borrow and invest.

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