SOURCE: Small Business Research Board

January 22, 2008 10:45 ET

Nearly One-Third of Manufacturing Firms to Seek 2008 Credit Level Increase; More Than One-Half to Remain at 2007 Level, 14% to Tighten Reigns, Says Small Business Research Board Study

Sixth of a Series -- While Relationships With Lenders are Described as Largely "Good" or "Excellent," Respondents Challenged by Greater Pressure for Personal Guarantees, Higher Loan Rates and Stricter Covenants, According to SBRB Report for "Business Today Magazine"

NORTHFIELD, IL--(Marketwire - January 22, 2008) - Nearly one-third of the small manufacturing businesses participating in the latest Small Business Research Board (SBRB) study will request credit level increases during 2008, according to the results of the poll released today.

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

Of the owners and managers responding to the SBRB poll, 32.6% will request an increase in their lines of credit this year. Meanwhile, 53.5% said they will maintain their current loan levels through 2008 and another 14% will seek to reduce their credit needs, according to a nationwide SBRB study.

This is a departure from 2007 when 21.1% of these respondents held the line on credit changes from the prior year, 14.3% decreased their credit needs and 27.1% increased their loan levels.

More than 37% of the respondents indicated they do not have loans nor a line of credit.

During 2007, 42% of the participants felt that access to credit was unchanged from the previous 12 months while 36.8% said it was "easier." Of the remaining respondents, 5.3% described access to credit as "more difficult" and 15.83% indicated that access to credit was "impossible."

The nationwide SBRB / Business Today Small Business Lending Relationship and Loan Requirements Study found 88.5% of the manufacturing businesses enjoy a "good" to "excellent" relationship with their principal lenders.

The SBRB / Business Today study also indicated that 81.1% of the relationships with their current principal lender have lasted at least five years, with 69.6% lasting 10 years or more. According to the report, 1.4% of the small businesses are in their first year with their current lead lender while 7.2% said their relationship is in the second year.

Of these same respondents, 67.4% said they were with their previous key resource for five years or longer before making a change.

Slightly more than 37% of the owners or managers said their business has a relationship with one lender and nearly 26% 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, 40% of the respondents said their principal lending relationship is with a local bank, 27.1% said the relationship is with a regional bank and an equal 27.1% said the relationship is with a national bank.

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

--  of those using their residence as collateral, one-half of the lenders
    are adjusting the borrowing levels. In those instances, 78.9% increased the
    credit ceilings and 21.1% decreased the credit amount;
--  21.9% of those responding to The SBRB / Business Today Small Business
    Lending Relationship and Loan Requirements Study contend more pressure for
    personal guarantees are having the most significant impact on their
    business.   Higher loan rates (19.2%) and stricter covenants (17.8%)
    followed as the second and third 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. 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%).

This is the sixth 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 five releases will detail the small businesses involved in the manufacturing, food and beverage, retail, distribution and wholesaling, transportation and automotive industries. Constructing and contracting was covered in the fifth release.

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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