As the state’s economy begins a slow recovery from the downturn, Connecticut’s businesses say credit conditions are starting to improve.
According to the first-quarter 2010 Connecticut Business & Industry Association/TD Bank Credit Survey, current credit conditions are the best they’ve been in more than a year, and businesses expect continued improvement.
About 25 percent of the 366 business executives surveyed said credit availability is a problem for their business. That’s down from 27 percent in the fourth quarter of 2009, and 31 percent from the third quarter of last year.
Additionally 50 percent of survey respondents said current conditions are average, good, or excellent.
“Ample and readily available credit for both consumers and businesses is key to sustained economic growth and expansion,” said CBIA economist Peter Gioia. “If 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 in a more efficient manner and keep the economic recovery moving forward.”
The lending environment in Connecticut has been a mixed bag since the onset of the financial crisis. While larger banks have pulled back on making loans, the state’s community banks have made capital available.
Bankers say, however, they have seen a decline in business loan demand because companies have been hesitant to take on more debt in the midst of economic uncertainty.
Many businesses have also seen their credit quality deteriorate, making it harder for them to qualify for loans, especially as banks tighten lending standards.
The good news is that business executives expect credit conditions to improve in 2010, according to the CBIA survey.
The Future Expectations Index, which measures credit expectations three to six months from now, stands at 19.1 – up from 16.4 last quarter.
A reading over 50 indicates improvement in credit conditions, while readings below 50 indicate deterioration.Â
At the same time, the overall CBIA/TD Bank Credit Availability Index also rose to a level of 17.3 in the fourth-quarter survey, up from the fourth-quarter low of 12.4.
The index, which indicates the health of Connecticut’s credit markets, measures two components: current conditions and expectations in the marketplace three to six months out.
Over the next three to six months, 10 percent of respondents expect credit conditions to improve, while 44 percent expect them to worsen.
