Small businesses are borrowing more than they were at the depths of the recession, but their appetite for loans remains poor, data released by PayNet Inc on Tuesday showed.

The Thomson Reuters/Paynet Small Business Lending Index, which measures the overall volume of financing to U.S. small businesses, jumped 12 percent in April from a year ago, PayNet said.

But the index, which sank about 1 percent on a seasonally adjusted basis from the prior month, is still more than 20 percent below its January, 2005 level.

The hesitation that small businesses still have about taking on new debt suggests the economic recovery may not be running on all cylinders. With small businesses holding back on new investments, economic recovery is on a plodding road, said Bill Phelan, PayNet's president and founder.

We're just not seeing the aggressive expansion in the small business economy that we really need to see to get job growth going, Phelan said in an interview. The growth rates are not as high as we thought that they could be coming out of the recession.

The April reading was 78.4, down from 79.0 in March. The index registered 100 in January, 2005.

In a bright sidelight to sluggish loan demand, data released by PayNet on Tuesday also showed that fewer companies are falling behind on their existing loan payments.

Accounts in moderate delinquency, or those behind by 30 days or more, fell in April to 3.35 percent from 3.83 percent in March, PayNet said Tuesday.

Nearly all lenders saw more on-time repayments, driven by improvements in the transportation and construction industries, Phelan said.

These small businesses are getting their financial house in order, Phelan said.

Accounts 90 days or more behind in payment, or in severe delinquency, fell to 1.21 percent in April from 1.29 percent in March.

Accounts behind 180 days or more, or in default and unlikely to ever get paid, fell to 0.92 percent of total receivables in April, from 0.94 percent in March, according to PayNet, which provides risk-management tools to the commercial lending industry.

The Thomson Reuters/Paynet small business lending index is correlated to developments in the overall economy, with changes in the index preceding changes in the overall U.S. economy by two to five months.

PayNet collects real-time loan information, such as originations and delinquencies, from more than 200 leading U.S. capital equipment lenders.

More on Thomson Reuters/PayNet Small Business Lending Index is available here

(Reporting by Ann Saphir; Editing by Kenneth Barry)