By Ann Saphir
(Reuters) - Small businesses borrowing surged in October, registering a 15th monthly double-digit increase and signaling the economy will continue to grow in coming months.
The Thomson Reuters/PayNet Small Business Lending Index, which measures the overall volume of financing to small businesses, rose 20 percent in October after increasing a revised 12 percent in September, PayNet said on Thursday.
Still, at 98.1, the index shows borrowing has not yet recovered to its level of 100 reached in 2005, well before the credit boom that burst with disastrous effects in 2007 and 2008.
Increased borrowing by small businesses points to better times for the broader economy because small firms account for the lion's share of new hiring. Companies use loans to buy equipment, and they need people to operate that equipment.
"It's not showing tremendous strength," PayNet founder Bill Phelan said in an interview. "But certainly this shows we are not headed for a double dip."
The data was recorded before the latest surge in urgency over the European debt crisis. On Wednesday, global central banks announced joint efforts to ease funding strains to European banks.
"Europe hasn't hit our shores yet," Phelan added. "When and if that happens, all bets are off."
Two years into a recovery from the worst recession in decades, the United States is still dogged by 9 percent unemployment. The Federal Reserve said on Wednesday the U.S. economy is growing moderately, but said hiring remains anemic and housing activity impaired.
PayNet tracks borrowing by millions of small U.S. businesses, which cut back dramatically on borrowing in 2008 and 2009.
A drop in delinquencies to a record low suggests companies are in better financial health, the PayNet data shows.
Accounts 90 days or more behind in payments, or in severe delinquency, fell to 0.38 percent in October, a record, from 0.41 percent in September.
Accounts in moderate delinquency, or those behind by 30 days or more, fell to 1.51 percent from 1.60 percent in September, PayNet said.
Accounts behind 180 days or more, or in default and unlikely ever to be paid, fell to 0.64 percent of total receivables in October, from 0.65 percent in September, according to PayNet, which provides risk-management tools to the commercial lending industry.
The Thomson Reuters/PayNet small business lending index is correlated to developments in the overall economy, with changes in the index preceding changes in the overall U.S. economy by two to five months.
PayNet collects real-time loan information, such as originations and delinquencies, from more than 250 leading U.S. capital equipment lenders.
(Reporting by Ann Saphir; Editing by Dan Grebler)