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Small biz lending up in Aug., 2nd straight gain

NEW YORK -- Business is looking a little brighter at smaller companies. A survey released Monday shows that they borrowed more money during August _ a sign that business owners are becoming more confident about the economy.

The survey by PayNet, a research firm that tracks loans to small business, shows that lending rose 3 percent, the second straight monthly increase. Prior to July, lending had fallen in five out of six months.

The Thomson Reuters PayNet Small Business index rose to 109.9 in August from 106 in July.

The index was just shy of its high point following the recession, 110, reached last December. However, the index was inflated that month by an expiring tax break that encouraged many small businesses to borrow money to buy or lease equipment. After the tax break expired, lending dropped sharply.

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

The report is encouraging because small businesses had cut back their borrowing because of uncertainty about the economy and their own sales. If companies continue to increase their borrowing, economists believe they will also increase their hiring.

The index was released as there was more good news about small businesses. The Institute for Supply Management said Monday that manufacturing increased in the U.S. for the first time in four months during September. The vast majority of manufacturers are small businesses.

More clues about the health of small business will come later this week. The payroll company ADP and the National Federation of Independent Business on Thursday release their reports on small business employment during September. And the Labor Department releases its employment report for the month on Friday.