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Originally published Wednesday, August 1, 2012 at 7:37 AM

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Study: Small business lending falls

Lending to small businesses is falling again even as some banks are offering more lenient loan terms to try to encourage borrowing, according to a study out Wednesday.

The Associated Press

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NEW YORK —

Lending to small businesses is falling again even as some banks are offering more lenient loan terms to try to encourage borrowing, according to a study out Wednesday.

PayNet, a research firm that tracks loans to small business, said that lending fell 5 percent in June from May's levels. Loan activity had increased in May after falling the four previous months.

The Thomson Reuters/PayNet Small Business Lending Index fell to 98.5 in June from a revised 103.8 in May.

The study is consistent with other gauges - including the Labor Department's monthly report on job creation - that show increasing caution among businesses. The drop in lending suggests that small companies are unwilling to invest or expand while the economy looks so uncertain, PayNet said.

PayNet bases its index on new commercial loans and leases granted to small businesses by U.S. lenders.

Some reports about small business, including the National Federation of Independent Business survey of owner optimism, have said banks are making it harder for small companies to borrow. William Phelan, the president of PayNet, however, says its research shows that banks are giving small businesses more lenient terms to urge them to borrow.

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