Exclusive: U.S. small business borrowing waves

By Ann Saphir

CHICAGO. Thursday, June 30, 2011 6: 22 am EDT

CHICAGO (Reuters) - borrowing by small American businesses have increased at a record pace in may, data PayNet Inc., outputs on Thursday showed, a sign that economic growth is about to take in the coming months.

The Thomson Reuters/PayNet Small Business loans Index, which measures the total volume of funding for small U.S. businesses, increased by 26% in may from a year earlier, PayNet said.

The index is now the highest since July 2008, two months before the collapse of Lehman Brothers and the derailment near the world financial system.

By small business loan is considered a harbinger of the economy in general because they represent as much as 80 per cent of new hiring. PayNet loans tracks are generally used to purchase or update plants and equipment.

The Federal Reserve has kept the rate close to zero since December 2008 to try to get out of the economy from the worst recession since the 1930s.

Last week, the Fed officials reiterated their promise of maintaining low rates for a period extended, but predicted that a slower than expected spring can give way to faster growth later this year.

Dallas Fed President Richard Fisher Tuesday said he expects growth of 4% in the second half, more than twice the 1.9% pace in the first quarter.

Data Thursday on loans for small business concerns to this optimistic point of view. Index signal typically changes in the global economy from two to five months in advance.

"If small businesses take this kind of opportunity, take risks, make investments in the long term, they see opportunities in the long term on the horizon," founding PayNet Bill Phelan said in an interview. "Who has obtained to a large positive sign for the economy".

Separate also outputs data Thursday showed small business prepared by default to their lowest level in five years, linking the records set in April and May 2006.

Accounts in the moderate crime or those behind by 30 days or more, fell in May to 1.95% of 2.06% in April, PayNet, said Thursday.

Accounts 90 days or more behind in payment, or in serious delinquency, fell to 0.59% in May of 0.63% in April.

Banks with the improvement of the quality of outnumbered assets banks with the deterioration of the quality of assets by four to one, said Phelan.

Accounts behind 180 days or more, or in default and unlikely to ever be paid, fell to 0.75 per cent of total debt in may, 0.77% in April, according to PayNet, which provides tools for risk management for the commercial lending industry.