Fast-growth companies lead in new bank loans

One in five of the fastest-growing companies in theUStook out a new bank loan in the first quarter, and a similar number increased their credit availability. But despite this attention to traditional financing sources, one-third of new borrowers have plans to explore nontraditional alternatives, such as angel financing, private placements, venture capital and public offerings. So says the latest PricewaterhouseCoopers "Trendsetter" Barometer.

The survey shows that fast-growth CEOs maintained a steady pace of bank borrowing and credit initiatives in the first quarter. The amount of available credit increased, on average, by 11.3%—a big jump from 6.7% in the previous quarter.

"This pace of bank financing activity suggests a steady recovery, essentially free of volatility for these 'Trendsetter' companies," said Tracy Lefteroff, global private equity leader for PricewaterhouseCoopers. "Product sector businesses in particular are looking to cover both costs of supplies and inventories of finished product. The bump in the amount of credit availability may hopefully hint at expectations for a higher level of business activity in the near future."

New borrowers planning more aggressive growth

Companies completing new loans in the first quarter are 23% larger than non-borrowers, averaging $35.3 million in revenue, versus $28.6 million. Borrowers also have more substantial hiring plans for the next 12 months than non-borrowers.

More borrowers plan to make major new investments of capital over the next 12 months: 47% versus 40%, respectively. "New borrowers are bigger, growing faster, and appear to have the wind of recovery at their back," said Lefteroff. "Their aggressive hiring and investment plans, when implemented, will further improve the business climate."

Non-traditional financing

Thirty-three percent of new borrowers are planning to explore non-bank financing options over the next 12 months—a sharp increase from 22% in the prior quarter.

In contrast, only 16% of non-borrowers expect to go this route, unchanged from the last quarter:

	Borrowers	Non-borrowers
Angel investors	20%	10%
Private placement	20%	7%
Venture capital	14%	7%
IPO	2%	X
Net total	33%	16%

"The big new focus on non-traditional financing is undoubtedly related to an expectation that interest rates will soon be going up," said Lefteroff. "These companies are wise to hedge their bets."

For more information, go to www.barometersurveys.com.