SOURCE: Small Business Research Board

January 25, 2008 16:30 ET

Auto, Other Vehicle Dealers Predict Modest Increase in 2008 Credit Needs, Says Small Business Research Board Study

Eleventh in a Series -- Majority of Respondents Describe Relationships With Lenders as "Excellent" Although Challenged by Loan Rates and Stricter Covenants

NORTHFIELD, IL--(Marketwire - January 25, 2008) - More small auto and other vehicle dealers participating in a Small Business Research Board (SBRB) poll will seek increases in their lines of credit during 2008, with nearly one-third planning to ask their principal lender to raise their loan limits.

The SBRB study of owners and managers of small auto and vehicle dealerships released today also indicated that while their relationships with lenders are mostly "good" or "excellent," they are being challenged by loan rates and stricter covenants.

Of the owners and managers responding to the nationwide SBRB poll co-sponsored by Business Today, 31.1% said they will request an increase in their line of credit during the next 12 months. Another 15.3% said they would decrease their credit needs and 53.3% said their needs would be unchanged from 2007.

On an unadjusted basis, 23.2% of the respondents increased their credit limit in 2007 while 12.5% decreased their loan levels. Another 44.6% said their 2007 limits were the same as in 2006. The remaining 19.6% said they did not have a line of credit nor any loans in 2007.

On an adjusted basis, removing those who indicated they didn't have a loan, 29% of the respondents increased their credit limit in 2007 while 15.5% decreased their loan levels and 55.5% held steady from the prior year.

During 2007, more than 62.8% of the participants felt that access to credit was unchanged from the previous 12 months while 27.9% said it was "easier." Another 7% reported access to credit was "more difficult" and the remaining 2.3% described their ability to attain credit as "impossible."

The nationwide SBRB / Business Today Small Business Lending Relationship and Loan Requirements Study found 56.4% of the auto and vehicle dealers enjoy an "excellent" relationship with their principal lenders and 29.1% 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 53.7% lasting 10 years or more. According to the report, none of the respondents were in their first year with their current lead lender while another 1.9% said their relationship is in the second year.

Of these same respondents, 67.5% said they were with their previous key resource for five years or longer before making a change, with 47.5% of those lasting ten or more years. Conversely, 12.5% of the respondents said they were with their previous lender for two years or fewer.

The study indicated that 33.9% of the owners or managers said their businesses have a relationship with one lender and 23.2% 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, 44.6% of the respondents said their principal lending relationship is with a local bank, 12.5% said the relationship is with a regional bank and 28.6% said the relationship is with a national bank.

The study also found that among owners and managers of small auto and other vehicle dealers that:

--  50% use their residence as collateral;
--  23.4% 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 while 17.2% cited
    stricter covenants.  Greater expense to attain a loan was mentioned by
    15.6% of the respondents. More pressure for personal guarantees and
    increased covenants also were among the top five most significant factors.

The SBRB report co-sponsored by Business Today solely focused on examining issues related to small businesses and their relationship with lenders. This is the eleventh and final report in a SBRB / Business Today studies 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 construction and contracting, manufacturing, food and beverage, retail, distribution and wholesale, and transportation industries were covered in six 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

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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