WASHINGTON -- The Federal Reserve has launched a survey to gauge the demand for credit among small businesses, as well as alternatives to bank financing these firms are seeking.

The agency recently hired Price Waterhouse to survey 6,000 small businesses across the country to develop a profile of their financial characteristics based on size, type of firm, and location.

It will include a review of problems that minority-owned firms may face in financing their business.

The Fed and the Small Business Administration, which is cosponsoring the project, will pay the contractor $1.1 million to conduct the survey. According to Fed documents, the agency wants to conduct a similar study every few years.

|Major Research Project'

Fed Vice Chairman David Mullins announced last December that the agency would perform the review. And in testimony before the Senate Small Banking Committee in March, he called the planned survey "a major research project."

Usually, the Fed relies on surveys of lenders, not of businesses, to assess credit needs and availability across the country. Only once before, in 1989, has the Fed launched such a widespread study of smaller firms. That review was also done in conjunction with the Small Business Adminsitration.

Alternative Financing

The survey will include questions about borrowing by firms in the last two years, credit denials, and loan terms, the Fed's proposal says. It will also ask businesses about alternative financing methods they have employed.

The information will be used to estimate aggregate amounts of ourstanding credit to small business. It will also pinpoint the characteristics of businesses that have greater difficulty obtaining credit and differences in the costs and availability of credit based on location, race, and type of firm.

The agency is required by law to collect information about small-business credit availability. Community activists and some members of Congress were angered by the Fed's decision last year to carry out this mandate by requiring banks to submit only limited information on their call reports.

Instead of requiring information based on the size and type of companies to which they are lending, since June the Fed has required data only on the size of business loans made.

Fed officials said they wanted to keep the documentation burden on banks low and that loan size was a reasonable proxy for business size.

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