SME Borrowers Not Enticed By Corporate Tax Cut Plans

New data from Thomson Reuters and PayNet finds small businesses pumped the breaks on their borrowing activity in March.

The firms announced Monday (May 1) that their latest Small Business Lending Index saw a 1 percent decline compared to March of 2016. Analysts also noted that the U.S. economy grew at a 0.7 percent annual pace in Q1, its slowest pace in three years.

That economic climate has led small business owners to pause plans for borrowing.

“They didn’t get sucked into all the euphoria of public markets; they are just [like], ‘Wake me up when we are there,’” said PayNet Chief Executive and Founder Bill Phelan, according to reports. “There’s not going to be any kind of enthusiasm.”

According to the data, plans for corporate tax cuts by the Trump administration haven’t helped to boost SME borrowing activity.

Other government policy action has led to hesitancy in SME borrowing too, added Phelan. According to the Index, healthcare companies decreased borrowing by 13 percent in March, likely due to the government’s struggle to repeal and replace the Affordable Care Act.

Overall, the portion of outstanding SME loan repayments that went more than 30 days past due in March remained unchanged from February levels at 1.68 percent.

Previous analysis from the Pepperdine Graziadio School of Business and Management found that SME borrowing could be stifled by federal interest rate hikes, with researchers warning small business owners to plan ahead for cash flow crunches.