Lending Down Thanks To Good Cash Flow

America's fastest-growing companies borrowed less in the third quarter because of increased cash flow, and less activity by high-tech firms, according to Coopers & Lybrand's latest "Trendsetter Barometer."

The study surveyed CEOs of 441 product and service companies, half of which are recognized as high-tech firms. The surveyed companies range in size from $1 million to $50 million in revenue/sales and are considered to be the fastest growing U.S. businesses.

Although the prime rate to borrow has increased, from 8.25% to 8.5%, Coopers & Lybrand attributed the lending slowdown to high-tech growth firms. Only 27% completed bank loans during the third quarter (34% obtained loans the previous quarter). "Ironically, although there are significantly fewer high-tech firms borrowing, they paid lower rates for their loans than their non-tech peers, 9.26% vs 9.35%, or 9 basis points less," says Warren Martin, national high-tech partner, Coopers & Lybrand LLP.

Good fortune's abound, the amount that growth firms did borrow was notably less.

"Trendsetter" firms decreased their composite credit by 28%. "Credit development by high-tech growth firms spiked in the previous quarter, possibly contributing to a lessened need right now," says Martin. Other possible reasons: declined use of non-traditional financing, and self-financing.

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