U.S. small business borrowing rises to six-year high, index shows Tue Dec 3, 2013 5:17am EST (Reuters) - U.S. small businesses boosted borrowing in October to its highest level in over six years, an index showed on Tuesday, fresh evidence that the budget battle that shut the federal government for 16 days did little to derail underlying economic growth. The Thomson Reuters/PayNet Small Business Lending Index, which measures the volume of financing to small companies, rose to 120.4 in October, PayNet said on Tuesday. That was the highest level since August 2007, just as the devastating U.S. financial crisis was gaining steam. In September, the index registered a reading of 109.9. 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 increase "bodes well for GDP," PayNet founder Bill Phelan said. When you have investment to increase assets to produce more goods, you've got to believe there's more job creation going on. With U.S. economic output now higher than it was when the index last peaked in January 2007, "there's a lot of room to grow here; this does not indicate any kind of froth," he added. The outlook for the job market is crucial to the Federal Reserve's decision on when to cut back on its massive bond-buying stimulus program, as Fed Chairman Ben Bernanke has said he wants further proof of labor market strengthening before doing so. The Fed next meets in two weeks to debate policy, although many economists do not expect central bankers to begin trimming bond buys until next year. Economic data has been mixed of late, with one gauge of U.S. factory activity rising last month to its highest since 2011, but factory payrolls pointing to a slowdown in manufacturing. Lower financial stress at small businesses, with more of them paying back loans on time, could also bode well for future borrowing. Delinquencies of 31 to 180 days held in October to 1.43 percent of all loans made, according to the Thomson Reuters/PayNet Small Business Delinquency Index - a new record low. A measure of accounts overdue as a percentage of all loans has 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 G Crosse