For Immediate Release
October 26, 2009

CONNECTICUT BUSINESSES SAY CREDIT CONDITIONS GETTING WORSE

CBIA/TD Bank Credit Survey reports record-low readings as credit continues to deteriorate

Despite signs that the economy now appears to be emerging from the recession, businesses are reporting that the availability of credit is worsening. The results from the third-quarter 2009 CBIA/TD Bank Survey on credit conditions in Connecticut show record-low readings—the weakest findings since the survey first began in early 2004.

Almost one in three (31 percent) respondents said credit availability is a problem for their companies—the highest reading since the survey began five years ago. In fact, the percentage of respondents with difficulty securing credit has more than tripled over the last four years, climbing from 10 percent in the third-quarter 2005, to 31 percent in the third-quarter 2009.

“In an economic environment that is still risk-averse, we must find new ways to extend credit to Connecticut companies in order to promote growth, which will help drive economic recovery,” says Don Klepper-Smith, chief economist and director of research at DataCore Partners in New Haven. “Our expansion is certainly apt to be short-lived if credit conditions remain where they are.”

Half of businesspeople surveyed rated current credit conditions as either fair or poor, while 44 percent said they were average. Only 7 percent expect conditions to improve over the next three months, while nearly half (46 percent) expect credit conditions to deteriorate further over the next three months.

“Connecticut companies simply must have access to capital in order to sustain and grow their businesses,” says Michael Hensinger, TD Bank’s head of middle market banking. “The economic recovery in Connecticut is dependent on the health and growth of our small and medium sized businesses.”

Despite record business closings and layoffs, furloughs, and other cutbacks, many businesses are looking ahead. Forty percent said if they could obtain credit today they would invest in new plants and equipment. One third said they would use credit to maintain their current workforce, and a quarter said they would expand into new operations, stores, or branches.

"Businesses are seeking funding to invest and grow their companies in Connecticut despite these economic challenges,” says Marie O’Brien, president of the Connecticut Development Authority (CDA). "That’s why it’s critical that we continue working together to meet their financial needs and to ensure economic growth and job creation in the state.”

The overall TD Bank Credit Availability Index (TDBCAI) fell to an index level of 11.8 in the third quarter survey, down 16 percent from the prior record-low of 14 posted last quarter and lower than the 19 reading recorded one year ago.

The TDBCAI, which indicates the health of Connecticut’s credit markets, has two primary components: one that measures current conditions and one that measures expectations in the marketplace three to six months out. A reading over 50 indicates improvement in credit conditions, while readings below 50 indicate deterioration.

CBIA/TD Bank Total Credit Availability Index	3Q09
TD Bank Current Credit Availability Index	11.9
TD Bank Future Expectations Index	11.8
TD Bank Total Credit Availability Index	11.8

 

CBIA Vice President and Economist Peter Gioia says a critical element in the survey is that businesses that are receiving financing are not getting all the capital they need. He says only half of respondents are receiving the financing they are requesting. “The problem is particularly acute for firms seeking more than $100,000,” says Gioia. “If businesses received the capital they need, we’d see more investment in new plants and equipment, and that would help expand operations and create jobs.”

The credit survey, conducted by the Connecticut Business and Industry Association (CBIA) and Donald Klepper-Smith, was sponsored by TD Bank and the Connecticut Development Authority. The methodology used to determine the index is similar to that used by The Conference Board to calculate consumer confidence measures. The survey was e-mailed to Connecticut businesses in September 2009. A total of 346 executives responded, for a 13 percent response rate and a margin of error of +/- 5 percent

For a copy of the survey, visit www.cbia.com/newsroom/surveys. For more information or to arrange an interview with Peter Gioia, CBIA vice president and economist, contact Nancy Andrews at 860-244-1957, or andrewsn@cbia.com.

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CBIA is the state’s largest business organization, with 10,000 member companies.

For more information contact Nancy Andrews, CBIA media relations manager, at 860-244-1957 or andrewsn@cbia.com.

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