US business borrowing picks up
A key measure of U.S. business borrowing continued to improve in July, a lender group told Reuters on Monday, as companies increased their investment in equipment and software and did a better job of staying current on their existing debts.
But the Equipment Leasing and Finance Association, a trade group representing the lenders that finance half the capital investment in the United States each year, said borrowing remains well below pre-recession levels, suggesting chief executives remain cautious about the economy’s direction.
ELFA said U.S. businesses took out $5.6 billion in loans, leases and lines of credit in July to invest in capital equipment, which can include anything from tool-and-die machines and delivery trucks to office furniture and computer hardware and software.
That was up from $5.5 billion in June and $4.8 billion last year — but still down nearly 25 percent from the $7.4 billion in investments made just two years ago.
ELFA said 3.45 percent of business borrowers were delinquent 30 days or more on their loans, leases or lines of credit in July. While that was up from 3.31 percent in June it was down from 3.9 percent last year — and the fifth consecutive month the year-over-year figure has fallen.
The charge-off picture was also encouraging. ELFA said lenders considered 1.5 percent of their receivables as losses unlikely to ever be recovered in July. That was down from 1.8 percent in June and 1.67 percent last year and the fifth consecutive month the year-over-year number has fallen.
Seventy percent of all credit applications were approved in July, ELFA said, unchanged from June but up from 65.5 percent last year.
“Financing demand appears to be picking up,” ELFA President William Sutton said. “It appears we’re heading in the right direction and our members remain cautiously optimistic that this trend will continue.”
MERGER ACTIVITY UP, TOO
Sutton noted that ELFA’s data mirrors a recently released U.S. Commerce Department report that showed a 22 percent jump in corporate investment in capital equipment during the second quarter — the biggest year-over-year increase since 1997.
But those numbers, too, remain well below the highs they hit prior to the global downturn. Looking just at equipment and software, the government says businesses spent about $1.04 trillion in the second quarter, way up from 2009 levels but still off the $1.1 trillion they were averaging each quarter before the recession.
Businesses are once again spending in other ways as well, as the flurry of recent merger activity makes clear. But the spending, analysts say, is a function of the enormous cash reserves built up during the recession — reserves that must now be put to work — more than it is a reflection of a big improvement in CEO confidence.