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U.S. small businesses boosted borrowing in September

By Ann Saphir

(Reuters) - U.S. small business borrowing rose last month from a year earlier, an index that tracks lending showed on Tuesday, signaling moderate growth ahead for the economy as a whole.

The Thomson Reuters/PayNet Small Business Lending Index, which measures the volume of financing to small companies, registered 109.7 in September, down 6 percent from August but up 16 percent from the same month a year earlier.

The differing number of business days in each month accounts for much of the change, PayNet founder Bill Phelan said, who looks to three-month rolling averages for a better reading on the underlying trend. That average, he said, is on a slow, upward path, with September registering an 11 percent rise, compared with a 7 percent gain at the start of the year.

"We're back to consistent growth," Phelan said in an interview. "Boring is beautiful here."

Historically, PayNet's lending index has correlated to overall economic growth one or two quarters in the future. Small companies typically take out loans to buy new tools, factories and equipment, so more borrowing can be an early harbinger of increased hiring ahead.

The outlook for the jobs market is crucial to the Federal Reserve's decision on when to cut back on its massive bond-buying stimulus program, with Fed Chairman Ben Bernanke saying he wants further proof of labor market strengthening before doing so.

The Fed unexpectedly decided last month that the economy was not strong enough to justify reductions in the program.

Low financial stress at small businesses, with more of them

paying back loans on time, could bode well for future borrowing.

Delinquencies of 31 to 180 days held in September at 1.47 percent of all loans made, according to the Thomson Reuters/PayNet Small Business Delinquency Index. That's a record low.

Accounts overdue as a percentage of all loans have fallen steadily since rising as high as 4.73 percent in August 2009.

PayNet collects real-time loan information such as originations and delinquencies from more than 250 leading U.S. lenders.

(Reporting by Ann Saphir; Editing by Ken Wills)

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