U.S. small businesses boost borrowing in April

(Reuters) – Small U.S. businesses boosted borrowing in April, marking the first gain since December as the Federal Reserve continues to buy bonds to stimulate a tepid recovery.

The Thomson Reuters/PayNet Small Business Lending Index, which measures the overall volume of financing to small U.S. companies, rose to 110.5 from an upwardly revised 99 in March, PayNet said on Monday. The March figure was originally reported at 98.5.

Business borrowing can point to trends in growth and employment, because when small firms take out loans they generally spend the money on new tools, factories and equipment. Such capital investment can be a prelude to new hiring.

The Fed is buying $85 billion in Treasuries and mortgage-backed securities each month in an effort to boost growth and jobs, but so far that stimulus has done little for small businesses, PayNet president Bill Phelan said in an interview.

Small businesses “are not heading for the exits, but they are not firing up yet either,” Phelan said.

The lending index rose 17 percent from a year earlier in April, but is still shy of the 112.8 level at which it started the year.

“There’s a lot of money being pumped in, but these businesses aren’t biting,” Phelan said, adding that when small businesses do not borrow, they are not as apt to hire.

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

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