SOURCE: Small Business Research Board

January 18, 2008 10:06 ET

Higher Loan Rates, More Pressure for Personal Guarantees Have Greatest Impact on Small Businesses Relationship With Lenders, Says Latest Small Business Research Board Study

Fourth of a Series

NORTHFIELD, IL--(Marketwire - January 18, 2008) - Higher loan rates and increasing pressure to provide personal guarantees are the two greatest factors impacting the relationship of small businesses with lenders, according to a nationwide Small Business Research Board (SBRB) study.

The report issued today indicates that 24% of those responding to The SBRB / Business Today Small Business Lending Relationship and Loan Requirements Study contend higher rates are having the most significant impact on their business. More pressure and demands for guarantees was identified by 16.1% of the respondents as the second most significant factor.

The SBRB report co-sponsored by Business Today Magazine was solely focused on examining issues related to small business and their relationship with lenders. More than 450 owners and managers throughout the U.S. participated in the study.

The study also indicated that greater expenses to obtain a loan (listed by 15.3%), stricter covenants (14.4%) and increased covenants (14%) also were among the top five lender related issues. They were followed by greater expenses required to comply with loan requirements (9.3%) and the need to upgrade to an audit (6.7%).

Higher loan rates were cited in five of the seven key industries tracked by the SBRB -- construction and contracting, retail, food and beverage, distribution and wholesaling and automotive. A greater demand for personal guarantees was the leading concern among the manufacturing companies. In the transportation industry, stricter covenants were the greatest concern.

This is the fourth in a series of 11 SBRB / Business Today reports examining small business lending relationships and loan needs. The first report indicated that small businesses in the U.S. said their relationship with key lenders was "good" or "excellent," and that relationships are lasting longer.

The second report related to overall 2007 loan needs and anticipated 2008 credit requirements. The report found that 26.8% 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.

The third report conveyed information about the use of residences as collateral for business loans. Of those business owners indicating that they use 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.

Subsequent reports will detail findings in the seven distinct industries.

Business Today Magazine is dedicated to serving the information needs of owners and managers of small businesses. The primary goal of the quarterly publication based in Buffalo Grove, Il. is to inform and educate its readers by providing timely, useful information that will help readers both contend with the daily demands of running their businesses as well as provide insight on achieving long term growth. Business Today Workshops also 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

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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