SOURCE: Small Business Research Board

January 23, 2008 10:15 ET

More Food, Beverage Companies to Seek Higher Credit Levels or Keep Same Loan Menu in 2008, Says Small Business Research Board Study

Seventh in a Series -- Majority of Respondents Describe Relationships With Lenders as "Excellent" Although Challenged by Higher Loan Rates, More Pressure for Personal Guarantees and Increased Covenants, Says SBRB Report for "Business Today Magazine"

NORTHFIELD, IL--(Marketwire - January 23, 2008) - More small food and beverage companies will either seek increases in their 2008 credit limits or at least try to sustain their 2007 levels, according to owners and managers participating in the latest Small Business Research Board (SBRB) study released today.

The SBRB study of owners and managers of small food and beverage businesses also indicated that while their relationships with lenders are mostly "good" or "excellent," they are being challenged by higher loan rates, greater pressure for personal guarantees and increased covenants.

Of the owners and managers responding to the nationwide SBRB poll, 27.8% will request an increase in their lines of credit this year, while 63.9% said they intend to maintain their current loan levels through 2008. The remaining 8.3% said they would decrease their loan needs.

On an unadjusted basis, 19.6% said they increased their loan ceilings in 2007 while 43.5% said they held the line last year as compared to 2006 and 13% decreased their loan limits. The remaining 23.9% 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, 25.72% increased the limit in 2007 while the limit for 57.14% remained steady and the level for 17.14% decreased when compared to 2006.

During 2007, more than 53.1% of the participants felt that access to credit was unchanged from the previous 12 months while 31.3% said it was "easier." Of the remaining respondents, 15.6% described access to credit as "more difficult."

The nationwide SBRB / Business Today Small Business Lending Relationship and Loan Requirements Study found 95.8% of the food and beverage businesses enjoy a "good" to "excellent" relationship with their principal lenders.

The SBRB / Business Today study also indicated that 79.8% of the relationships with their current principal lender have lasted at least five years, with 61.7% lasting 10 years or more. According to the report, 2.14% of the small businesses are in their first year with their current lead lender while 6.4% said their relationship is in the second year.

Of these same respondents, 66.6% said they were with their previous key resource for five years or longer before making a change. Conversely, 11.1% were with their prior lead lender only one year and 7.4% had a relationship of just two years with the previous resource.

Slightly more than 40% of the owners or managers said their business has a relationship with one lender and nearly 25.5% 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, 44% of the respondents said their principal lending relationship is with a local bank, 17% said the relationship is with a regional bank and 21.3% said the relationship is with a national bank.

The study also found that among owners and managers of small food and beverage businesses that:

* of those using their residence as collateral, 54.3% of the lenders are adjusting the borrowing levels. In those instances, 66.7% increased the credit ceilings and 33.3% decreased the credit amount;

* 25% 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 (16.7%) and increased covenants (16.7%) tied for second as the next most significant factors.

The study also indicated that stricter covenants (14.6%), greater expenses to obtain a loan (10.4%) and greater expense to comply with loan requirements (10.4%) were also among the top five most significant factors.

The SBRB report co-sponsored by Business Today Magazine was solely focused on examining issues related to small business and their relationship with lenders. This is the seventh 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 four releases will detail the small businesses involved in the retail, distribution and wholesaling, transportation and automotive industries. The construction and contracting industry and manufacturing were covered in the fifth and sixth releases.

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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