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April business borrowing, credit quality improve

By Lynn Adler

NEW YORK (Reuters) - A key measure of U.S. business activity rose in April and credit quality improved as the economy slowly gathered steam, a lender group said on Monday.

U.S. businesses originated $5.1 billion of loans, leases and lines of credit in April, 10 percent more than a year ago, although 18 percent below March's $6.2 billion, the Equipment Leasing and Finance Association (ELFA) said.

"We're still seeing a steady recovery, albeit slow, and some sectors are still continuing to perform and some sectors are still continuing to underperform," ELFA Chief Executive William Sutton said in an interview.

It is not uncommon to have a monthly dip in the first month of each quarter, he said.

Construction and trucking remain the largest underperforming sectors, according to ELFA.

"If you look at the cumulative data for this year to date, we're still seeing an increase of 27 percent compared with the same four months of last year," said Sutton.

That bounce comes off of depressed levels a year ago, he said, when the businesses were more reticent to expand and purchase new equipment.

ELFA represents lenders who finance half of the capital investment in the United States each year. The group reports economic activity for the $521 billion equipment finance sector.

CREDIT QUALITY ON THE MEND

Charge-offs, which reflect loans unlikely to be repaid, fell to 0.8 percent in April from 1.3 percent in March and 1.6 percent in April 2010.

This was the lowest level since before the recession, when charge-offs hovered around 0.5 percent in late 2007, Sutton said.

ELFA said 3.3 percent of borrowers in April were 30 days or more late, down from 3.5 percent in March. This was 9 percent lower than a year earlier.

Lenders approved 76 percent of capital spending credit applications in April, up from 75 percent in March.

ELFA's monthly confidence index for May dropped to 63.2 from April's 70.3, meantime, reflecting the uneven performance of various business sectors.

"Some sectors are still down, for example construction and trucking, and they're not coming back as fast as everybody would like," holding back the confidence level, Sutton said.

Total headcount for equipment finance companies rose slightly after being flat for five straight months and was up 1 percent year-over-year.

(Editing by Padraic Cassidy)

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