August 6, 2015 | Small Business Financing

Small Business Outlook Remains Positive

Small Business Outlook-minThe outlook for small businesses remains strong according to recently released numbers about small business sentiment and borrowing demand. The data, which was released separately by the National Federation of Independent Business (NFIB) and Thomson Reuters/PayNet Small Business Lending, shows that small business optimism remained steady and the demand for small business loans, while down from a record in April, is strong. The positive outlook is indicative of the need for small businesses to have access to capital and the opportunity to grow.

According to the NFIB, its Small Business Optimism Survey increased 1.4 points in May to 98.3 with six of the ten Index components increasing.  This is the highest reading of the index since December and consistent with the 40-year average.

It appears that the small business sector has finally attained a normal level of activity, which will hopefully keep the economy moving forward, even at a sub-par pace. That being said, improved profit trends accounted for over half the Index gain, a rather unusual but welcomed development. This was supported by positive sales trends and continued, although rising, fuel prices,” said Bill Dunkelberg, NFIB Chief Economist according to a release by the trade group.

Along with these positive numbers about small business sentiment, Reuters News reported recently that small business borrowing outpaced lending demand from a year ago by 3 percent. The Thomson Reuters/PayNet Small Business Lending Index, which tracks originations and delinquencies from more than 250 leading U.S. lenders, was 128.5 in May, down slightly from a record high of 140 in April, but up 3 percent from May 2014.

“I think a breather was in order” after a string of strong monthly gains, PayNet founder Bill Phelan said. “We still have this expansion trend intact,” he said, as quoted by Reuters.

Overall, the strong results in April and May show momentum for small business. After contracting in the first quarter, the U.S. gross domestic product, which is a prime indicator of small business activity, is gaining strength led by robust consumer sales, home prices and retail sales.  The job market is also continuing to gain steam.

The positive numbers about the outlook for small businesses may indicate an opportunity for growth for companies with access to capital. This capital can come from internal reserves, traditional commercial lenders, or non-bank lenders that offer loan products such as purchase order loans or contract lending.

The key for companies is to be aware of the trends, understand the liquidity options, and take advantage of the source of funds that works best with the company’s credit profile and business needs.