Recent data might hint at increased small business caution.
Small businesses took out fewer loans last month—the second consecutive month with decreased borrowing. However, borrowing is up 7 percent from February of last year, according to data released March 31 from the Thomson Reuters/PayNet Small Business Lending Index.
According to Inc., The Associated Press reported that fewer loans might be a result of bad winter weather, which would follow a similar 2014 economic trend that also had particularly severe early months.
The Reuters/PayNet index, which gathers information from businesses with $1 million or less in outstanding debt, fell from 122.4 in January to 119.2 in February. The index was 133.5 in December, the highest it’s been since the index started in January 2005.
In the report, PayNet founder and president Bill Phelan said that a 1 to 2 percent increase in borrowing shows that businesses are looking to replace worn-down assets while larger increases show that businesses are investing more to expand their production of goods and services.
So is this month’s decreased borrowing a sign of larger caution? Perhaps. Small business outlook was mixed in February. Seasonally adjusted levels for earnings trends and expecting the economy to improve were down from February 2014, 19 percent and 1 percent respectively. Plans to increase employment and make capital outlays were both up by more than 10 percent.
Keep an eye out on April 14 for NFIB’s Small Business Economic Trends report that will detail more about business owners’ optimism—or lack thereof.
Sources: Reuters, Inc., NFIB
