What Is the Small Business Lending Index (SBLI)?

The Small Business Lending Index (SBLI) is an index of business lending that is published by PayNet, a subsidiary of Equifax, that is generally considered to be a leading indicator of the economy. It measures the aggregate number of new loans that are made to small businesses in the past 30 days.

The SBLI provides "early signals of future economic growth, demand for capital, and business fixed investment across multiple sectors of the economy." It is an indicator for future changes in the gross domestic product (GDP).

Key Takeaways

  • The Small Business Lending Index (SBLI) is an index provided by PayNet that measures the number of new loans that are issued to small businesses in the past 30 days.
  • The SBLI is considered to be a leading indicator of the economy, particularly gross domestic product (GDP), as small businesses react faster to changes in the economy than larger businesses.
  • Data for the SBLI is gathered from the largest commercial and industrial loan lenders in the nation and is available on a monthly basis.
  • The SBLI makes all the data available on a state-by-state basis as well as by industry, encompassing 18 industries in total.

Understanding the Small Business Lending Index (SBLI)

The Small Business Lending Index (SBLI) utilizes PayNet's database of loans and leases from the largest commercial and industrial loan providers to measure the volume of small business loans issued over the past 30 days.

There were 31.7 million small businesses in the U.S. in 2020, which account for 99.9% of U.S. businesses. Therefore, understanding the actions of small businesses, as well as their success and failure, is a key to understanding the success of the U.S. economy.

The SBLI measures the loan activity of these small businesses. Loans are used for a variety of purposes, such as for growth, expansion, paying down debts, and a host of other needs. For this reason, the SBLI is an indicator of GDP. According to PayNet, because small businesses are more sensitive to changes in the economy, the SBLI serves as an indicator of macroeconomic industry trends.

Construction of the Small Business Lending Index (SBLI)

According to PayNet, the index is segmented into 988 indices at the national, state, and industry levels which are formulated on a rolling 12-month basis due to the volatility of smaller sample sizes.

The index is published monthly in three phases as follows:

  • PRELIMINARY: current month data reflecting most recent small business lending activity released
  • REVISED: data for the month preceding Preliminary release
  • FINAL: data for the month preceding Revised release

In its Strategic Insights report, PayNet discusses the SBLI index and the insights that it provides on the economy. It provides insight into regional trends as well as industry trends. In discussing regional trends, the section covers loan activity in specific states, usually referencing the 10 largest states.

The industry section covers 18 industries and discusses the specific ones that have seen the greatest change in loan origination. Industries included are agriculture, construction, professional services, healthcare, mining, quarrying, and oil and gas.

It also provides an economic context of all of the information, discussing economic growth and factors in the economy that could have impacted the index. The SBLI is available as a standalone graph as well that can be filtered by state and industry, providing a significant amount of granular detail.

Small Business Lending Index (SBLI) vs. Small Business Delinquency Index (SBDI)

PayNet also constructs the closely-related Small Business Delinquency Index (SBDI), which measures loan delinquencies by 31-90, 91-180, and 30-180 days.

It is like the Small Business Lending Index (SBLI), but also measures small business financial stress and default risk, provides early warnings of future insolvency, and serves as a leading indicator of changes in unemployment rates on both the national level and for some U.S. states.

According to PayNet, "it provides insight to financial services executives, economists, policymakers, and regulators in order to understand the stage of the business cycle and to set credit oversight policies."

Utilizing both indexes together in analysis can provide a strong understanding of the financial health of the economy, where the economy is heading in terms of booms or recessions, as well as the specific industries that are performing poorly or well.