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Starting to feel the pinch

The credit markets had tightened even before the September 11 attacks.

Despite efforts by Alan Greenspan and the Federal Reserve Board to encourage the flow of borrowing and investment, companies were starting to complain of difficulties in obtaining funds even before the attacks on the World Trade Center and the Pentagon stalled the economy.

More than one third of CFOs surveyed said that bank credit was harder to get than it was a year ago. Almost two thirds found it tougher to line up credit than it was three years ago.

Interestingly, getting credit from suppliers hasn't proved anywhere near as hard: Only 15 percent said it was somewhat harder to obtain than a year ago. In fact, 30 percent had negotiated longer payment terms, and 20 percent were unilaterally taking longer to pay.

To ensure that their companies have sufficient funds for their needs, 68.9 percent of the CFOs surveyed turned to bank credit, while 67.2 tapped the debt market. Surprisingly, 21.3 percent of CFOs said they didn't need to do anything to ensure funding at a time of tightening credit.

Only 25.5 percent of CFOs arranged new credit lines, while 44.7 percent renegotiated existing ones. Almost 30 percent drew down on credit lines.

Although 38.3 percent of companies said that their customers demanded longer payment terms, only 15 percent of companies offered; the rest accepted the risk of losing customers. But the vast majority - 86.4 percent - found that they didn't lose business because of their unwillingness to lengthen credit periods. And only 1.8 percent found that they gained customers when they eased payment terms.

Since September 11 the Fed has opened the credit spigot further. When that will flow through to the marketplace, however, remains to be seen.

Are you finding it harder to obtain bank credit now than you did one year ago?

Yes, much harder 3.3%

Yes, somewhat harder 34.4

About the same 62.3

No, somewhat easier 0.0

No, much easier 0.0

Are you finding it harder to obtain bank credit now than you did three years ago?

Yes, much harder 26.2%

Yes, somewhat harder 39.3

About the same 31.1

No, somewhat easier 1.6

No, much easier 1.6

Are you finding it harder to obtain supplier credit than you did one year ago?

Yes, much harder 0.0%

Yes, somewhat harder 15.0

About the same 83.3

No, somewhat easier 1.7

No, much easier 0.0

Are you finding it harder to obtain supplier credit than you did three years ago?

Yes, much harder 1.7%

Yes, somewhat harder 18.3

About the same 78.3

No, somewhat easier 0.0

No, much easier 1.7

How are you ensuring that your company has funds adequate to meet its needs? (Check all that apply.)

Bank credit 68.9%

Supplier credit 24.6

Debt 67.2

Equity 18.0

Don't need to do anything 21.3

If you are using bank credit, which approach are you using?

Arranging new bank lines of credit 25.5%

Renegotiating existing bank lines of credit 44.7

Drawing down on existing credit lines 29.8

If you are using supplier credit, which approach are you using?

Negotiating longer payment terms 30.0%

Stretching payment for orders 20.0

Not altering terms 50.0

If you are using debt, which approach are you using?

Selling fixed-term bonds 58.5%

Selling convertible bonds 4.9

Private placement 12.2

Planning to sell bonds within the next six months 12.2

Planning to sell bonds within the next 12 months 12.2

If you are using equity, which approach are you using?

Selling common stock 45.5%

Selling preferred stock 9.1

Private placement 18.2

Planning to sell stock within the next six months 0.0

Planning to sell stock within the next 12 months 27.3

Is your company offering longer payment terms to customers than it offered one year ago?

Yes 15.0%

No 85.0

Are customers demanding longer payment terms than they demanded one year ago?

Yes 38.3%

No 61.7

Has your company lost customers because it has refused longer payment terms?

Yes 13.6%

No 86.4

Has your company gained customers because of easier payment terms?

Yes 1.8%

No 98.2

Has your company been able to reduce outstanding receivables?

Yes, significantly (by 30 days or more) 5.0%

Yes, somewhat (by five to 30 days) 10.0

Yes, slightly (by one to five days) 36.7

No change 30.0

No, they have increased slightly (by one tofive days) 11.7

No, they have increased somewhat (by five to 30 days) 6.7

No, they have increased significantly (by 30 days or more) 0.0

The results of CFO Forum are based on quarterly surveys of a universe of 1,600 chief financial officers. Because of rounding, responses may not total 100 percent.

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