Small businesses are asking for fewer bank loans than a year ago and getting rejected more often, according to a new survey conducted by Arthur Andersen Enterprise Group and National Small Business United.
The national survey of 687 small businesses found that 45% of respondents applied for a bank loan during the 12 months ended in April, compared with 49% in the year-earlier survey. The percentage of loan applications that were approved dropped to 75% from 77%.
The percentage of loan applicants who reported "problems obtaining loans" climbed to 68% from 52% in the 1992 survey.
Twice as many loan applicants this year - 40% versus 20% - blamed "tighter regulations" over banks as the biggest obstacle to their gaining credit. Only thirty-two percent said they had not encountered any problems, down from 45% a year earlier.
The survey sponsor said the results underscore the link between tight bank regulation and a weak economy and strengthen the Clinton Administration's plan to encourage more character loans.
Northeast, Southeast Hit Hard
"Access to credit prevents owners of small and midsize businesses from having to lay off employees or slow down production [while] waiting for payments from previous sales," said John Galles, executive vice president of the NSBU, a nonprofit group representing small-business owners. "Ultimately, character loans can produce sales and jobs."
The survey found the most severe problems among businesses in the Northeast and Southeast, where 47% and 45% of respondents respectively reported unfulfilled capital needs. That contrasts with 31% of firms reporting similar problems in the Midwest and 26% on the West Coast.
Bank loan applications had an approval rate of 84% in the Midwest, 75% in the West, 70% in the South, and 67% in the Northeast, the survey found.
Despite complaints about credit access, most respondents claim their businesses are improving. Two-thirds forecast revenue gains over the next 12 months, while 59% said they expected higher profits. One out of every four respondents anticipated hiring at least one additional employee.
However, 52% of the firms surveyed warned that a "recessionary economy" is the biggest challenge to their survival and growth.