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Lending to small businesses improved in September, although recovery remains elusive

Nov 08, 2011 Walt Wojoiechowski

Small business borrowing increased in September, although at a slower pace than the month before, offering further uncertainty over the state of the economy. The Thomson Reuters/PayNet Small Business Lending Index gained14 percent, down from a revised 18 percent increase in August. The credit market has been cited as a leading cause of ongoing economic frustration, as some analysts argue small firms are holding off on hiring or expansion due to limited credit availability. However, September's hike in lending activity marks the 14th straight month of double-digit growth. Over that period, unemployment has fluctuated around 9 percent and shown few signs of improvement on the horizon. "We're entering this slow-growth, low-risk phase of the business cycle," PayNet founder Bill Phelan told Reuters. "The last time, that phase lasted four to six quarters." Meanwhile, business loan delinquencies fell to a record low in September, suggesting that although companies are not hiring or investing in substantial growth, they are beginning to rein in on their debts and improve their financial situation.