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Small business lending is usually used as a measurement of economic health and confidence. So any slowdown is a bad economic indicator.

PayNet, a lending solutions provider, points out several possible reasons for the slowing of small business loans in December aside from the U.S. government shutdown that started late in December.

According to the PayNet CEO Bill Phelan, the lending data is a sign that small businesses throughout the country are starting to “show signs of cautiousness during the last few months of 2018.” In addition to the government shutdown, small businesses are wary of a possible standoff after the midterm elections that would halt borrowing.

PayNet’s Small Business Lending Index (SBLI) also dropped 7 percent from December 2017 and December 2018. It shows the first year-over-year drop since September 2017.

The drop in lending rate in December is not an isolated case but part of a larger declining trend.

PayNet data showed that lending slowed in seven of the top industries. The biggest drops were in public administration, accommodation and food service and professional, technical and scientific services.

PayNet also reported that it’s Small Business Delinquency Index in December rose by 2 basis points or an increase of 8 basis points on a year-over-year basis. The delinquency data showed that there had been an increasing number of small businesses that did not pay their loans on time. Although overall small business confidence and overall economic health are still relatively high, these findings are possible troubling trends. Small businesses are not confident of their ability to grow and get financing that they can pay on time. PayNet believes that the trend will start to affect the economy in the near future.

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