CBIA/Farmington Bank Survey Finds Possible Boost for Business Lending

Connecticut's credit conditions are showing signs of improvement according to the Fourth-Quarter 2011 CBIA/Farmington Bank Credit Availability Survey, with the credit availability index rising more than five index points to 22.9.

With economic activity improving, many economists now believe the prospects for rising profits may boost business lending at a critical time in the business cycle, thereby further reducing the risk of recession in 2012.

"Achieving an actual step up in economic growth in Connecticut requires more favorable credit conditions, with ample credit being made available for both consumers and businesses," says John Patrick, president and CEO of Farmington Bank.

"To the degree that Connecticut businesses can gain timely access to credit, they will be able to increase inventories, hire new employees, modernize facilities, and finance day-to-day operations."

According to state economists, better credit conditions are extremely important in promoting overall economic recovery for many small and midsize businesses.

"In 2011, Connecticut showed encouraging economic signs," says CBIA economist Peter Gioia. "Unemployment was down; spending power, business confidence, and holiday spending were up; and interest rates were at record lows.

"As a result, many of Connecticut's small businesses are beginning to show more optimism about near-term business projects."

Don Klepper-Smith, chief economist and director of research at DataCore Partners, adds, "The current data on overall credit conditions is encouraging and adds to a body of evidence pointing to a stronger economy. Having access to timely credit in ample amounts will surely help us build on this rising tide of economic momentum and hopefully increase business confidence statewide."

The fourth-quarter 2011 survey showed that 46% of all businesses polled now expect the outlook for their individual firms to improve in 2012, while 37% anticipate better economic performance nationally over the next three months.

Other key findings:

  • Only 23% of respondents expect conditions to improve over the next three months.
  • 33% anticipated some degree of improvement within the next three months in their own industry, while only 18% expected industry conditions to weaken.
  • More than one-third (36%) of respondents replied that they used financing within the past three months to meet capital needs, and 64% said they had not sought financing.
  • One-third of respondents stated the financing needed most by their firms was for working capital for day-to-day operations, while another 15% cited machinery and equipment purchases.
  • 48% stated that if available, credit would be used for new plants and equipment; 19% would use it for expansion into new stores, branches, and operations; 17% said they would use credit to maintain current workforce; and 24% said they would add new hires.
  • More than one-third (36%) of respondents stated that inability to secure adequate credit would mean they would be unable to finance increased sales. Well over half (60%) stated they would be unable to grow or expand their businesses.

"The state of Connecticut's economy is slowly showing signs of improvement," says Marie O'Brien, president of the Connecticut Development Authority (CDA).

"In order to continue that trend, it is imperative that Connecticut companies have access to timely credit availability, which is critical for job growth and business expansion."

The Fourth-Quarter 2011 CBIA/Farmington Bank Credit Availability Survey was emailed to 1950 Connecticut businesses in early January 2012. A total of 211 executives responded, for a margin of error at 95% confidence at +/- 6.7%.


CBIA is Connecticut's largest business organization, with 10,000 member companies. For more information, please contact Meaghan MacDonald (860.244.1957; meaghan.macdonald@cbia.com) or visit cbia.com/newsroom.