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Aug. 24, 1998 -- Optimism among small-business owners is as high as it's been in four years, according to a survey commissioned by KeyCorp, and that upbeat feeling has been a boon to lenders who have seen a surge in borrowing.
"These are very good times for small businesses and the responses to the small business survey really confirmed that," says Sandy Maltby, KeyCorp's vice chairman of small-business services. "These were businesses all around the country and they were not necessarily KeyCorp customers."
Revenues are up
Seventy-two percent of the 401 respondents in the semiannual survey, released July 28, said their total revenues had increased 32 percent during the last three years, and nearly two-thirds said the country and the economy were headed in the right direction.
"What that means to us, as a bank, is we see entrepreneurs coming into the bank with balance sheets that are very, very strong," making lending much easier, Maltby says.
Another 21 percent said their revenues were unchanged. Only 6 percent said their income had dropped, by an average of 20 percent in the past three years.
Business owners who were women, and those located in the South, were the most optimistic about the potential for additional growth.
Extra cash
Entrepreneurs finance their fledgling enterprises with personal credit cards, equity lines of credit and traditional commercial loans. Some are using their cash hoards to pay down debt, others are using it to justify new debt, Maltby says.
"Most banks will tell you they are seeing double-digit growth" in commercial lending, she says. "There has been a surge in borrowing over the last several years, because the economy has been doing so well."
Interest rates have held fairly steady despite the growth in borrowing because they do not follow a supply-and-demand formula. They are based on indexes that have held constant.
The risky thing
The danger in boom-time small-business borrowing lies, as it does for individuals, in the economy going bust and income falling while the debt is still in place.
"These are small companies with little behind them," Maltby says.
A majority of the business owners surveyed said their companies needed to make the greatest improvement in marketing and technology.
The barrier to technological improvements was money, for 29 percent of those polled. Personal computers are in now in use by 89 percent of those queried, up 20 percent from just a year ago.
Thirty-seven percent told surveyors their company had a World Wide Web site, but only 10 percent said it had had a major impact on their business.
KeyCorp says its survey queried owners, presidents, partners, chief executive officers or chairmen, directors and chief financial officers at manufacturing and service companies with annual sales between $1 million and $5 million. Questions were asked between May 11 and June 15.
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