Credit Becoming More Critical To U.S. Middle Market

U.S. middle market businesses report a tighter credit environment in 2002, with 40% taking reactionary steps such as soliciting proposals from new lenders or reducing the number of banks they use to increase their business and their subsequent profile with remaining providers. This is a key finding of new research by Greenwich Associates. The credit squeeze remains more muted in the middle market (defined as companies with between $10-500 million in annual sales) than with large corporations, where businesses are reporting heavy pressure. Just one in six middle market companies have experienced a change in their lead bank‚s loan and credit facility terms. Of that subgroup, 28% cited altered pricing as the most important change in terms, and 21% noted more restrictive collateral formulas/advance rates. Only 14% reported an outright reduction in credit availability. ‘Because credit losses tend to lag the business cycle and the wave of accounting scandals may not yet be over, banks are scrutinizing borrowers‚ financial statements more carefully than ever,’ Greenwich Associates consultant Robert Neuhaus said.

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