Small businesses are shunning new bank loans, despite lower interest rates and easier credit conditions, according to a just released survey by the National Federation of Independent Business.

As of July, when the survey was conducted, just 32% of the group's members said they were borrowing on a regular basis, meaning at least once a quarter. That's the lowest level in the 20-year history of the survey.

The record-low level of borrowing activity reflected general pessimism about the impact of the Clinton administration's economic policies.

Impact of Taxes

A number of the association's members will be directly affected by the higher taxes contained in the administration's recently enacted budget bill, said William Dunkelberg, chief economist of the group and dean of the business school at Temple University in Philadelphia.

"This is just a big blow to the bottom line to partnerships, proprietorships," and other group members, he said.

Small businesses are also worried about added costs associated with the administration's health-care reform proposals, Mr. Dunkelberg said.

Typical Small Business

The Washington-based group represents over 600,000 small businesses, each typically having five employees and annual revenue of $250,000

One out of every seven employers in the United States is a member of the association, Mr. Dunkelberg said.

Apparent Contradition?

Credit availability was not an issue for small businesses, according to the latest association survey. Just 3% of respondents cited the ability to obtain financing as their most important problem.

The finding seems to contradict recent Congressional testimony by Federal Reserve Board chairman Alan Greenspan.

"I would scarcely argue that the so-called credit crunch phenomenon is over," Mr. Greenspan told the House Banking Committee last month in his semiannual report on the Fed's monetary policy.

But Mr. Dunkelberg said that if there was a credit crunch, association members would be complaining about it, as they did in the early 1980s.

During that period credit availability consistently was cited by a large percentage of small businesses as their most important problem.

"Our view all along [has been] that there is no credit crunch" this time, Mr. Dunkelberg added.

Bankers around the country have been saying for months that slack business lending reflects sluggish credit demand, not an unwillingness on the part of banks to lend.

No Lack of Money Seen

"Every bank in the world is out there beating the bushes for loans," said William Rossman, president and chief executive officer of Mid-State Bank and Trust Co. in Altoona, Pa.

"That's an indication to me that there is a lot of money to be lent if there is a need for it," added Mr. Rossman, who is also president of Robert Morris Associates, a trade association for commercial loan and credit officers.

The average interest rate for short-term loans fell to 8.3% in the second quarter from 8.6% in the first period, according to the National Federation of Independent Business survey.

"I interpret falling rates as a sign that banks are trying to move merchandise," Mr. Dunkelberg said.

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