The nation's fastest-growing companies are turning less to banks and more to themselves and other sources for their financing needs, a new study shows.
The Coopers & Lybrand Trendsetter Barometer looked at the first-quarter borrowing practices of 444 product and service companies.
It found bank borrowing down 6 percentage points from a year ago, with 32% having applied for loans. Only 29% completed new loans or loan extensions.
"Companies are generating good profits, so they are generating more internal cash flow which reduces the need, to some extent, for bank funding," said James LaFond, a managing partner at Coopers & Lybrand in Washington. "That's maybe the major reason why."
The companies surveyed had revenues ranging from $1 million to $50 million. Identified by the media as among the nation's fastest-growing businesses, half consider themselves high-technology firms.
The survey found credit development fell from the fourth quarter. Twenty-two percent of the companies increased their credit in the period, off 3 percentage points from the previous quarter and 6 points from a year earlier.
A majority of the companies plan on expansion, with 61% stating that they would reinvest 14.1% of composite revenue in the business.
"I think this reflects the optimism and the quality of the economy right now," said Mr. LaFond.
He also noted that the overall good health of the companies-35% of which saw margins increase-gives them further incentive to lean away from bank loans.
One managing director of a bank syndicated loan department said the bank loan business is cyclical. Other markets may be more appealing right now, but overall, "the bank market has never been better."
Some of the companies surveyed stated they plan to seek alternative financing. Fifteen percent are seeking private placement, 13% are looking for angel investors, and 9% want venture capital.
