Lending to Small Business up 18% in 2011 - Free Enterprise
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Lending to Small Business up 18% in 2011

In a possible sign of economic recovery, small-business lending hit a four-year high in November, a new report shows. At the same time, the number of small-business loans in delinquency declined.

The results are revealed in the Thomson Reuters/PayNet Small Business Lending Index that tracks the overall volume of small-business financing, Reuters reports.

The lending index jumped by 18% between November 2010 and November 2011. It's now at its highest level since February 2008.

The surge shows "a new phase of the business cycle," PayNet's founder told Reuters. "Businesses are betting on the future with increased investment spending."

The demand for small-business loans is rising as sales increase and businesses become more creditworthy, one small-business lending broker told The Wall Street Journal. That's positive news, since more than 60% of small-business loan applications were denied in 2011, the Journal reports.

But obstacles remain. Some banks are now imposing higher interest rates on small-business owners who pay off their balances in monthly installments instead of all at once, the Journal reports.

Still, the Thomson Reuters/PayNet survey shows more small business owners are taking charge of their debts. The number of loans in "moderate delinquency" (behind by 30 days or more) and "severe delinquency" (behind by 90 days or more) both declined in November to 1.5% and 0.39%, respectively, Reuters reports.

The Small Business Lending Index mirrors other economic indicators that seem to suggest a recovery, Reuters reports. For example, the annual pace of economic growth in the fourth quarter of 2011 is expected to top 3% -- up from 1.8% in the third quarter.

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