October 1, 2014 / 9:04 AM / 3 years ago

U.S. small business borrowing falls in August -Thomson Reuters/PayNet

WASHINGTON, Oct 1 (Reuters) - Borrowing by U.S. small businesses fell sharply in August, data showed on Wednesday, a sign firms were pausing to consolidate recent investments in their operations.

The Thomson Reuters/PayNet Small Business Lending Index fell 10.2 percent to 114.5 in the month from a more-than-seven-year high reached in July.

The index gauges borrowing by firms with $1 million or less in outstanding debt.

The drop brought the index 1.2 percent below its year-ago level. It was the first year-on-year decline since March 2013, but it followed a period of strong borrowing growth.

PayNet founder and President Bill Phelan said August's decline suggests small businesses are taking a break from the borrowing and investments of previous months to integrate new property or equipment in their operations.

In four of the five prior months, the index had double-digit gains from a year earlier, and Phelan said the drop did not indicate any major changes in the economy.

"The report looks negative, but the reality is that after five consecutive months of strong increases, they're digesting those heavy investments. It means that small businesses are not over-investing," Phelan said.

The investments over the prior several months, he said, will lead to new jobs as businesses hire workers to run their newly purchased equipment or plants.

A separate PayNet index showed loan delinquencies inched up in August from the prior month. Delinquencies of 31 to 180 days, PayNet's broadest measure of late loan payments, applied to 1.58 percent of all loans made, compared with 1.55 percent in July.

PayNet collects real-time loan information such as originations and delinquencies from more than 250 leading U.S. lenders. (Reporting by Elvina Nawaguna; Editing by Dan Grebler)

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