An index that measures small business lending in the U.S. rose 16% in September, marking a second consecutive month of double-digit increases by the index and signaling that the economy is on the road to recovery, according to a report released Monday.

The performance of small business lending, as gauged by the Thomson Reuters/PayNet Small Business Lending Index, serves as a leading indicator of the path that the nation's gross domestic product is likely to take in the coming two to five months, said William Phelan, PayNet founder and president.

The index was largely in a downward trend from January 2007 until March of this year, the start of a period of moderate increases that tailed off into a lackluster gain of 2% in July. But in August, the Small Business Lending Index posted a 15% increase over last year and followed that up with a 16% bump up in September.

"It's not yet a robust recovery, but clearly we're on the road to a recovery," Phelan said, noting that the index tends to reflect the general movements in the broader economy.

With small businesses ramping up their borrowing, it should come as no surprise that they've been paying their bills on time with greater frequency. On Friday, PayNet released figures showing that the delinquency rate for small business loans has been improving across the board, from those who are behind 30 days or more to those who are in default, according to a Reuters report.

Loans that were behind 30 days or more fell to 2.65% in September from 2.81% in the previous month. And loans that were 90 days or more past due dropped to 0.76% in September, down from 0.85% in August. And defaults -- those loans that have not seen a payment in 180 days or more -- made an incremental improvement to 0.81% from 0.84% a month earlier.

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I don't want to hear about small business borrowing. Tell me they are hiring more people. That is what I want to hear.

November 01 2010 at 10:03 PM Report abuse rate up rate down Reply

That's a pretty interesting trend. I'm not really convinced a recovery is here. But I don't doubt that small businesses will lead it when it does arrive. And in particular, I think women entrepreneurs are going to be extremely important. I suggest reading this piece from an actual woman entrepreneur about her experiences. It gives me some hope.

November 01 2010 at 5:06 PM Report abuse +1 rate up rate down Reply

LOL somebody's smoking some wachy nobama weed again....more smoke and mirrors! Wait till the real numbers start to crunch about how nobama and congress deliberatly voted the unemployment extension and made sure it runs out before the election! Small business and services cannot sustain a national economy. While it's good news for the service sector, (pool cleaners and gardners for the mansion monguls) It cannot begin to replace manufacturing or production labor providing a product. Nor can every one fill a chair in the corner of the living room pretending to be a wallstreet traitor with the latest ripoff 4 square software. Most important is to get out and vote tomorrow. Look at your candidates past voting history not what they promise. Vote the snake oil salesmen out and take back mainstreet!

November 01 2010 at 4:46 PM Report abuse +3 rate up rate down Reply