Market Overview

Barlow Research's Economic Pulse Report Finds Small Business Credit Demand to Be Flat, Competition Increasing


Following Hurricane Sandy, the presidential election and negotiations surrounding the “fiscal cliff”, small businesses ($100K-<$10MM) and middle market companies ($10MM-<$500MM) appear to be regaining some of the confidence that was lost during the second half of 2012. However, many of these companies still remain cautious in the light of economic uncertainty.

Applications for additional credit remained flat in small business and decreased in the middle market, while the expected need for bank loans was minimal. “Do not expect increased loan demand from either small business or middle market companies,” says Bernie Kuechler, Director of Data Solutions, Barlow Research.

Although the percentage of small business and middle market companies that anticipate applying for additional credit decreased in the first quarter 2013, competition in the credit market ramped up. Twenty-nine percent of small businesses would consider a non-bank institution (e.g., credit union) for additional credit, an 18% increase from the previous quarter. Ray Johns, Managing Partner, Barlow Research encourages banks to, “Mind your competition and determine your value proposition to win over the profitable customers.”

Other important results from the first quarter 2013 Economic Pulse report:

-Middle market financial condition optimism grew, as small business financial condition optimism was less apparent.
-Small business and middle market expectations to hire employees and add capital expenditures increased in the first quarter 2013.
-Seventeen percent of small businesses and 58% of middle market companies anticipate increasing wages over the next 12 months.
-At least 60% of small business and middle market companies have no current need for credit or do not borrow.
-The percentage of small businesses that extended or renewed an existing line of credit increased.

"With demand flat and rates at all time lows, expect increased competition for quality credits," says Joel Mueller, Research Analyst, Barlow Research.

About Barlow Research Associates, Inc.:

Barlow Research Associates, Inc., founded in 1980, provides research and consulting services to the banking industry in the U.S. and overseas with specialties in custom research, strategic consulting and syndicated research programs for small business, middle market and business Internet banking.

Barlow Research Associates, Inc.
Bernie Kuechler, 763-253-1830
Director of Data Solutions

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