EXCLUSIVE - Smallest U.S. businesses borrowing again - PayNet

By James B. Kelleher

CHICAGO (Reuters) - The tiniest U.S. small businesses, which led the broader economy into the past two recessions and are widely regarded as the best hope for job creation in any recovery, are showing signs of improved confidence and financial health, according to a new study.

The examination of loan, lease and line of credit activity conducted by PayNet Inc for Reuters found that U.S. businesses with less than $100,000 in outstanding debts began borrowing again cautiously this spring to invest in their businesses – a trend that continued through the end of the study period in September.

Financing originations among these so-called microbusinesses are still down year-over-year. But they are no longer falling faster than originations for larger-sized small

businesses -- those with borrowings above $100,000 -- as they were for nearly three years running.

"This looks like an inflection point," said William Phelan, the president of PayNet, which provides risk management tools to the commercial lending industry.

"These little businesses are a leading indicator and the signals they're sending are improving."

Another encouraging sign, according to PayNet?

Delinquencies among these microborrowers peaked this spring and have improved steadily since then.