The economy is improving, and as small businesses gain more capital, they may have an increased need for accounting software to manage their finances. Business management was forced to do more with less to regain lost profits after the recession, but conditions are finally improving.
In July, small businesses took on more debt. The Thomson Reuters/PayNet Small Business Lending Index, which measures the amount of financing extended to small companies, rose 11 percent to 117.7, which is the highest level since August 2007. Typically, the lending index correlates to business and economic growth one to two quarters in the future. Small businesses often need to access credit to prepare for increased expansion in the near-term future.
"There is some optimism returning to small businesses ... they are responding to some demand," Bill Phelan, PayNet President, said in an interview with Reuters. "As long as interest rates are within reasonable boundaries ... a strong economy with demand is better than a weak one with low interest rates."
Small companies usually take out loans in order to buy new tools, facilities and equipment, and increased borrowing could be a sign of more hiring in the near future. The Federal Reserve will base its decision to cut back on its bond-buying stimulus on the job market outlook.
Small business health could be a positive sign for the economy
Small companies are experiencing less financial stress. The index found delinquencies of 31 to 180 days on loans decreased to 1.48 percent of all borrowing, which is the lowest level ever recorded, Entrepreneur said. If more firms pay back loans on time, it could be a positive trend for future borrowing.
Although the expansion of small-business lending is predicted to lead to a significant increase in jobs, the recovery does not appear to spread equally across all industries. Because growth in some industries is contracting, it is unclear how many jobs will come from higher business borrowing, Fox Business stated. Growth in industrial materials manufacturing is contracting, which could be troubling for other sectors.
Since many businesses take out additional loans when they plan to make new investments in equipment and software to boost productivity. Small business management software can help companies manage finances and grow revenue.