More of the nation's fastest-growing companies are financing their expansion with existing lines of credit and cash flow rather than taking out new bank loans, according to a Coopers & Lybrand survey.
Only 30% of the rapidly expanding companies surveyed at the end of the third quarter had obtained bank loans during the period, a decline from 35% at the beginning of the year.
These companies are bankable. Only 2% of their loan applications are rejected, and their loans have an average annual interest rate of 9.12%.
But the expanding firms have enough revenue that they don't need bank loans, said Pete Collins, director of entrepreneurial advisory services at Coopers & Lybrand.
"They are preparing for contingencies, but they are confident enough about their cash flow that they are willing to go ahead with lines of credit," Mr. Collins said.
The typical firm surveyed had 70 employees, $7 million of annual revenue, and projected growth over the next five years of 800%.
"They are feeling good about the economy and looking to invest in their company," Mr. Collins said.
About 58% of the respondents, which included manufacturers, retailers, and service companies, planned major investments, totaling 13.6% of their revenue.
Fewer than one-third of the executives surveyed said their companies' profitability would be a barrier to growth. Some 63% of the respondents said they were optimistic, while just 7% were pessimistic.
Chief executives said they would consider using private investors, venture capital, and debt restructuring to finance growth.
"I don't think these CEOs are closing the door on bank financing," Mr. Collins said. "It's just that they are feeling flush with cash."
During the third quarter, 30% of the respondents increased their credit, up from 26% a year ago. Aggregate new credit also increased.
