HOME  SURVEYS U.S. INDUSTRIES U.S. Distribution & Wholesaling Distributors, Wholesalers to Moderate 2008 Credit Needs
Distributors, Wholesalers to Moderate 2008
Credit Needs; Nearly Two-thirds Expect to Remain at 2007 Levels, Says
Small Business Research Board Study
Majority of respondents describe relationships with lenders as
“excellent” although challenged by higher loan rates, more pressure for
personal guarantees
Ninth in a Series
NORTHFIELD, IL (January 25, 2008) – More small
distribution and wholesale companies participating in a nationwide
Small Business Research Board (SBRB) study expect to maintain their
current loan levels through 2008 with nearly two-thirds indicating they
will hold the line “as is” -- an increase of more than 20% from the
previous year.
The SBRB study of owners and managers of small distribution and
wholesale businesses released today also indicated that while their
relationships with lenders are mostly “good” or “excellent,” they are
being challenged by higher loan rates and greater pressure for personal
guarantees.
Of the owners and managers responding to the nationwide SBRB poll
co-sponsored by Business Today, 64.3% said they intend to maintain
their current loan levels through 2008 while 7.1% said they would
decrease their loan needs. The remaining 28.6% said they would seek to
increase their loan limits.
On an unadjusted basis, 41.1% said they held the line on their loan
ceilings in 2007 while 14.1% indicated they reduced their loan needs
last year when compared to 2006. Another 22.4% said they increased
their credit ceiling in 2007. The remaining 22.4% said they did not
have a line of credit nor any loans.
On an adjusted basis, removing those who indicated they didn’t have a
loan, 53% said their 2007 loan limit was the same as in 2006 while
18.1% decreased their loan needs last year. The remaining 28.9%
increased the limit in 2007.
During 2007, more than 57% of the participants felt that access to
credit was unchanged from the previous 12 months while 25.3% said it
was “easier.” Of the remaining respondents, 13.9% described access to
credit as “more difficult” and 3.8% as “impossible.”
The nationwide SBRB / Business Today Small Business Lending
Relationship and Loan Requirements Study found 56.1% of the
distribution and wholesale businesses enjoy an “excellent” relationship
with their principal lenders and 29.9% have a “good” relationship.
The SBRB / Business Today study also indicated that 81.5% of the
relationships with their current principal lender have lasted at least
five years, with 60.2% lasting 10 years or more. According to the
report, 1.9% of the small businesses are in their first year with their
current lead lender while 5.6% said their relationship is in the second
year.
Of these same respondents, 67.6% said they were with their previous key
resource for five years or longer before making a change. Conversely,
7.4% were with their prior lead lender only one year and 10.3% had a
relationship of just two years with the previous resource.
The study indicated that 38.5% of the owners or managers said their
businesses have a relationship with one lender and 28.4% have a
relationship with two lenders. The remainder have concurrent
relationships with three or more lenders. Questions about the quality
of the relationships only pertained to the principal lenders.
Additionally, 49.5% of the respondents said their principal lending
relationship is with a local bank, 12.1% said the relationship is with
a regional bank and 30.8% said the relationship is with a national bank.
The study also found that among owners and managers of small distributors and wholesalers that:
- 50.6% use their residence as collateral and
of those doing so, more than 40% are subject to rate adjustments by
lenders. In those instances, 62% increased the credit ceilings and 38%
decreased the credit amount;
-
30.2% of those responding to The SBRB / Business Today Small Business
Lending Relationship and Loan Requirements Study contend higher loan
rates are having the most significant impact on their business. More
pressure for personal guarantees (17.2%) and greater expense to obtain
a loan (16.4%) followed as the next most significant factors.
The study also indicated that increased covenants and stricter covenants were also among the top five most significant factors.
The SBRB / Business Today report solely focused on examining issues
related to small businesses and their relationship with lenders.
This is the ninth in a series of 11 SBRB / Business Today reports
examining small business lending relationships and loan needs. Key
findings in the previous reports studied the trends of all small
businesses throughout the U.S. and indicated that:
- 26.8% of all respondents will raise their
loan requests in 2008 for an increase of 3.5 points from the 23.3% of
the small business which elevated their loan levels in 2007;
- of
those business owners using their home as collateral, 42.4% said their
lenders had amended their borrowing levels with two-thirds (66.7%) of
the respondents receiving higher credit ceilings and the balance
receiving lower credit limits; and
- higher loan rates and
increasing pressure to provide personal guarantees are the two greatest
factors impacting the relationship of small businesses with lenders.
The next two releases will detail the small businesses involved in the
transportation and automotive industries. The construction and
contracting, manufacturing, food and beverage and retail industries
were covered in four preceding releases.
Business Today, Inc. is dedicated to serving the information needs of
owners and managers of small businesses. The primary goal of Business
Today, based in Buffalo Grove, Il., is to inform and educate by
providing timely, useful information that will help readers of Business
Today Magazine and attendees at Business Today Workshops contend with
the daily demands of running their businesses as well as provide
insight on achieving long term growth. Business Today Magazine is
published quarterly while Business Today Workshops are conducted
throughout the U.S. to provide educational resources for entrepreneurs
and their managers.
The Small Business Research Board ascertains and reports attitudes on a
wide variety of national and international issues that impact small
businesses. These studies benefit owners and managers and also provide
opportunities for third parties to gain real time insight into the
attitudes of small businesses.
The latest information about the Small Business Research Board can be found at www.biznus.net.
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© 2008 Small Business Research Board
For more information about this poll, results of previous studies or
other matters related to the Small Business Research Board, please
contact Raymond D. Minkus, (847) 441-4192.
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