Despite an improvement in credit conditions, most of the nation's top growth companies were reluctant to borrow from banks in the second quarter, according to a survey by Coopers & Lybrand.
The finding appears to support the argument that the falloff in business lending mainly reflects weak loan demand, rather than an unwillingness of banks to lend.
The survey "certainly does reinforce what banks have been saying all along," said William Turner, senior executive vice president at Chemical Banking Corp. in New York.
"We would love to make some more loans, and are looking for them, but we're not seeing huge demand out there," Mr. Turner added.
Lower Rates, Less Borrowing
The chief executives of 328 fast-growing product and service companies, interviewed by Coopers & Lybrand, reported both lower interest rates and increased credit availability in the second quarter.
According to the survey, these companies were charged 1.35 percentage points over the prime rate, on average, in the second quarter. The spread was 1.62 points over prime in the first quarter and 1.71 points in the fourth quarter of last year.
The narrowing should blunt some of the criticism banks have faced in Washington over the unusually wide spread between their own funding costs and the prime rate, currently 6%.
Still, only 35% of the survey respondents said they took out new bank loans or increased existing credit lines. That's off from 38% in the first quarter.
While most of these companies are still projecting rapid revenue growth for 1992, their midyear forecasts were less bullish than before, creating an overall reluctance to assume more debt.
"Perhaps there was a [credit] crunch earlier, but now people are scared to borrow," said Peter Collins, a director of Coopers & Lybrand's emerging-business services group.
Deborah Nugent, vice president for finance at Software Spectrum in Texas, said there's no credit crunch affecting her company, a reseller of software products.
Bidders for Unsecured Line
Right now, three banks are bidding to provide the company with a new $10 million unsecured credit line.
"What I'm seeing is banks relatively aggressive in bidding on the business," Ms. Nugent said.
Since going public a year ago, though, Software Systems doesn't need the credit line as much as it once did.