SOURCE: Small Business Research Board

January 24, 2008 11:24 ET

Retailers to Moderate 2008 Credit Needs; Two-Thirds to Remain at 2007 Level, 9% to Tighten Reins, Says Small Business Research Board Study

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

NORTHFIELD, IL--(Marketwire - January 24, 2008) - The majority of small retailers participating in a nationwide Small Business Research Board (SBRB) study will try to maintain their current loan levels through 2008 and another 9% will seek to reduce their credit needs during the year.

The SBRB study of owners and managers of small retail businesses 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, 67.9% said they intend to maintain their current loan levels through 2008 while 8.9% said they would decrease their loan needs. The remaining 23.2% said they would seek to increase their loan limits.

On an unadjusted basis, 43.9% said they held the line on their loan ceilings in 2007 while 16.4% indicated they reduced their loan needs last year when compared to 2006. Another 17.8% said they increased their credit ceiling in 2007. The remaining 21.9% 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, 56.1% said their 2007 loan limit was the same as in 2006 while 21.1% decreased their loan needs last year. The remaining 22.8% increased the limit in 2007.

During 2007, more than 53.7% of the participants felt that access to credit was unchanged from the previous 12 months while 24.1% said it was "easier." Of the remaining respondents, 16.7% described access to credit as "more difficult" and 5.5% as "impossible."

The nationwide SBRB / Business Today Small Business Lending Relationship and Loan Requirements Study found 87.7% of the retail businesses enjoy a "good" to "excellent" relationship with their principal lenders.

The SBRB / Business Today study also indicated that 74% of the relationships with their current principal lender have lasted at least five years, with 60.3% lasting 10 years or more. According to the report, 2.7% of the small businesses are in their first year with their current lead lender while an equal 2.7% said their relationship is in the second year.

Of these same respondents, 69.3% said they were with their previous key resource for five years or longer before making a change. Conversely, 2% were with their prior lead lender only one year and 14.3% had a relationship of just two years with the previous resource.

More than 46% of the owners or managers said their business has a relationship with one lender and 19% 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, 52.1% of the respondents said their principal lending relationship is with a local bank, 20.5% said the relationship is with a regional bank and 23.3% said the relationship is with a national bank.

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

-- of those using their residence as collateral, 43.1% of the lenders are
   adjusting the borrowing levels. In those instances, 75% increased the
   credit ceilings and 25% decreased the credit amount;

-- 22.1% 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 (17.6%) and increased covenants (16.2%)
   followed as the next most significant factors.

The study also indicated that stricter covenants (14.7%) and greater expenses to obtain a loan (13.2%) 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 businesses and their relationship with lenders. This is the eighth 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 three releases will detail the small businesses involved in the distribution and wholesaling, transportation and automotive industries. The construction and contracting industry, manufacturing and retail were covered in the preceding three 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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