Food, Beverage Companies to Adjust Credit Levels in 2008

More small food and beverage companies will seek increases in their 2008 credit limits or try to sustain their 2007 levels, according to owners and managers participating in the latest Small Business Research Board study released late last month.
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 percent will request an increase in their lines of credit this year, while 63.9 percent said they intend to maintain their current loan levels through 2008.
On an unadjusted basis, 19.6 percent said they increased their loan ceilings in 2007 while 43.5 percent said they held the line last year as compared to 2006, and 13 percent decreased their loan limits.
On an adjusted basis, removing those who indicated they didn’t have a loan, 25.72 percent increased the limit in 2007 while the limit for 57.14 remained steady and the level for 17.14 decreased when compared to 2006.
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 percent of the lenders are adjusting the borrowing levels. In those instances, 66.7 percent increased the credit ceilings and 33.3 percent decreased the credit amount.
One-fourth 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 and increased covenants tied for second as the next most significant factors at 16.7 percent of respondents each.
The study also indicated that stricter covenants (14.6 percent), greater expenses to obtain a loan (10.4 percent) and greater expense to comply with loan requirements (10.4 percent) were also among the top five most significant factors.
The SBRB report co-sponsored by Business Today Magazine was 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 percent of all respondents will raise their loan requests in 2008 for an increase of 3.5 points from the 23.3 percent of the small businesses that elevated their loan levels in 2007. Of those business owners using their home as collateral, 42.4 percent said their lenders had amended their borrowing levels with two-thirds of the respondents receiving higher credit ceilings and the balance receiving lower credit limits. ?

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