What Is the Small Business Lending Index?
The Small Business Lending Index (SLBI) is an index of business lending that is published by Thomson Reuters/Paynet 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, using 2005 as the base year for computations.
The SLBI provide early signals of future economic growth, demand for capital, and business fixed investment across multiple sectors of the economy, including as an early signal of changes in GDP. It also provides lenders with a snapshot of the future so they can adjust their underwriting and approval criteria as needed.
Understanding the Small Business Lending Index (SLBI)
The Small Business Lending Index (SBLI) measure the volume of small business loans issued over the past 30 days and are based on the most recent data from the largest commercial and industrial lenders in PayNet's U.S. database, including both loans and leases.
The Small Business Lending Index correlates most closely with the GDP, as it leads as an indicator by an average of two to five months. The index is generated from loan origination information supplied by over 200 U.S. lenders. This data is then collected by Paynet and used to create the index. Historically, the SBLI encompasses nearly $750 billion in loans. The index is formulated monthly at the national level, and 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.
Because small businesses generally respond to changes in economic conditions more rapidly than larger businesses do, the Small Business Lending Index serves as a leading indicator of macroeconomic and industry trends. The index is published monthly 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
Small Business Delinquency Index (SBDI)
Thompson Reuters/PayNet also constructs the closely-related small business delinquency index (SBDI). This index measures the net volume of loans to small businesses. It is like the Small Business Lending Index, 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 US states.
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.