Exclusive: U.S. business borrowing rebounds cautiously

By James B. Kelleher

CHICAGO (BestGrowthStock) – A key measure of U.S. business borrowing continued to show modest signs of improvement in June, a lender group told Reuters on Monday, as companies increased investment in their operations and did a better job of staying current on existing debts.

But the Equipment Leasing and Finance Association, which represents lenders that finance half the capital equipment investment in the United States each year, said much of June’s increase came in the form of short-term renewals of existing equipment leases, suggesting businesses remain “hesitant to commit to new capital spending for expansion.”

The group said the wariness was especially pronounced among companies in the construction and trucking industries and small- rather than medium- or large-sized businesses.

And it said it continued to see unexpected weakness in financings for expensive medical equipment, like MRI and CT scanners, despite the fact the healthcare industry held up much better than most during the recent downturn.

“In general, demand for the equipment we finance is still soft,” said ELFA President William Sutton, “while credit quality and payment experience have been improving consistently.”

ELFA said businesses took out $5.5 billion in loans, leases and lines of credit in June to invest in capital equipment — everything from tool-and-die machines and delivery trucks to computer hardware and software and office furniture.

That was a 25 percent increase from the preceding month and up nearly 6 percent from the same month last year. But it was still off 33 percent from the $8.3 billion in capex financing U.S. businesses did in May two years ago, just prior to the worldwide recession.

Other measures of credit activity tracked by the group indicated businesses found it a little easier to remain current on their existing loans last month and get lenders to finance new investment.

ELFA said 3.31 percent of business borrowers were delinquent 30 days or more on their loans, leases or lines of credit in June, down from 4.0 percent in May and 4.1 percent last year.

Seventy percent of all requests by businesses for credit were approved last month, ELFA said, up from 68 percent in May and 65 percent last year.

The charge-off picture, however, was more mixed. ELFA said lenders considered 1.8 percent of their receivables as losses unlikely to ever be recovered in June. That was up from 1.6 percent from May but down from 2.44 percent last year.

The data, which was provided to Reuters a day ahead of its official release, came on the same day the U.S. Commerce Department said that sales of new U.S. single-family homes rebounded strongly in June from the prior month’s record low, driving the number of houses on the market to its lowest level in nearly 42 years.

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(Reporting by James B. Kelleher, editing by Matthew Lewis)

Exclusive: U.S. business borrowing rebounds cautiously