American small businesses increased their borrowing to their highest levels in six years in July, in a sign that many owners are anticipating an uptick in economic activity.
The Thomson Reuters/PayNet Small Business Lending Index, which measures commercial-loan and lease volume, climbed 11 percent in July to 117.7. That makes it the highest level since August 2007 and up sharply from the 105.7 reading in June, PayNet said.
"There is some optimism returning to small businesses...they are responding to some demand," PayNet President Bill Phelan told Reuters. "As long as interest rates are within reasonable boundaries....a strong economy with demand is better than a weak one with low interest rates."
What is unclear is how that borrowing will manifest itself into growth at companies. Traditionally, small businesses take loans for equipment purchases, upgrades in technology, or expansion of facilities. It could be that such activity leads to job growth – or, conversely, could simply be moves by businesses to boost productivity with existing staff.
On the bright side, amid the increase in borrowing, businesses are paying their bills on time. Delinquencies of 31 to 180 days on loans fell in July to 1.48 percent of all loans made, according to the Thomson Reuters/PayNet Small Business Delinquency Index. That is the lowest level ever recorded by PayNet, the firm said.
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