For Immediate Release
July 24, 2009

 

CONNECTICUT CREDIT CONDITIONS LOWEST ON RECORD
Most recent CBIA/TD Banknorth Survey reveals dramatic deterioration

Results from the latest CBIA/TD Banknorth Survey on credit conditions in Connecticut show that the U.S. credit crunch continues to adversely impact credit conditions locally. The latest readings on credit conditions (second quarter 2009) are in fact the lowest on record, surpassing recent lows set in the third quarter of last year.

The TD Banknorth Credit Availability Index (BNCAI), 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, and readings below 50 indicate deterioration.

The overall BNCAI fell to an index level of 14.1 in the second quarter survey, down 36% from the level of 22.3 posted last quarter and lower than the 19.4 reading recorded in the third quarter of 2008. Though negative opinions about future credit conditions outweighed positive opinions, by more than a 5:1 margin, the good news is that this latest reading on future expectations is higher than the level of 12.0 recorded in 3Q08. 

Almost half of businesspeople surveyed (47%) rated current credit conditions as average, and 46% described them as either “poor” or “fair”; 42% expect credit conditions to exhibit further deterioration.

“If we’re to realize meaningful economic recovery, Connecticut businesses must have access to cost-effective capital in order to keep their businesses functioning,” says Don Klepper-Smith, chief economist and director of research at DataCore Partners in New Haven.

Michael Hensinger, TD Banknorth’s chief lending officer and head of its commercial lending in Connecticut, says consumers’ and business owners’ access to capital will be a key factor in generating a turnaround in the local economy. “Although many banks and financial institutions have been unable to keep up lending levels due to credit problems they are experiencing,” he says, “we have been growing our new business loan volume throughout 2009.”

“As we continue to face challenging economic and credit conditions, we must plan for the eventual recovery expected in this economic cycle,” says Marie O’Brien, president of the Connecticut Development Authority (CDA). “CDA is working with our state’s economic development team, chambers of commerce, and other business and community groups to ensure that companies can meet their financial needs today and plan for growth in the future.”

When asked, “Has your company used financing within the last three months to meet your capital needs?” about 26% of the respondents replied in the affirmative, while 74% said that they had not sought financing. The new data corroborate the findings of other surveys showing that in recent quarters, many firms are limiting their exposure to the national credit crunch by seeking creative alternatives to traditional credit markets. Specifically, they are seeking financing through credit cards, leasing, private loans, and vendor credit. Most financing sought or obtained fell under the category of small (less than $1 million) or micro business loans (under $100,000).

Forty-two percent of companies surveyed said they would borrow capital in order to maintain their current workforce, and 22% would hire new workers. About a third would invest in new equipment, and about a quarter would expand operations, stores, or branches. For those that described credit availability for their firms as problematic, 56% said that they would be unable to grow their businesses due to a lack of capital, 46%, stated that they would have to reduce their workforce, and 38% expected to reduce employee compensation and/or benefits.

CBIA/TD Banknorth Total Credit Availability Index 2Q09
Banknorth Current Credit Availability Index      13.4
Banknorth Future Expectations  Index   14.8
Banknorth Total Credit Availability Index          14.1

The credit survey, conducted by the Connecticut Business and Industry Associaiton (CBIA) and Donald Klepper-Smith, was sponsored by TD Banknorth 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 more than 2,700 Connecticut businesses in June 2009. A total of 386 executives responded, for a 14% response rate and a margin of error of +/- 5%.

For a copy of the survey, visit www.cbia.com/newsroom/surveys. For more information or to arrange an interview with Peter Gioia, CBIA economist, contact Mr. Gioia at 860-244-1945, 860-335-4857, or pete.gioia@cbia.com.

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

 

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

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