Construction firms seek to clip 2008 credit needs.

The majority of small construction and contracting businesses participating in a nationwide Small Business Research Board (SBRB) study will try to maintain their current loan levels through 2008 and another 11% will seek to reduce their credit needs during the year.

The comprehensive SBRB study of owners and managers of small construction and contracting businesses also indicated their relationships with lenders are mostly "good" or "excellent," but they are challenged by higher loan rates and stricter covenants.

Of the owners and managers participating in the study co-sponsored by Business Today Magazine, 64.4% said they would not request an increase in their line credit level in 2008. Meanwhile, 11% will attempt to decrease loan amounts while 24.7% said they will increase their loan levels.

This is a departure from 2007 when about 45% of these respondents held the line on credit changes from the prior year, one-fourth decreased their credit needs and one-third increased their loan levels.

Nearly 20% of the respondents said they do not have loans nor a line of credit.

During 2007, 42% of the participants said access to credit was unchanged from the previous 12 months while 29% said it was "easier." Of the remaining respondents, 20.3% said they described access to credit as "more difficult" and 8.3% indicated that access to credit was "impossible."

The nationwide SBRB / Business Today Small Business Lending Relationship and Loan Requirements Study found 85.5% of the small construction and contracting business enjoy a "good" to "excellent" relationship with their principal lenders.

The SBRB / Business Today study also indicated that 74.4% of the relationships with their current principal lender have lasted at least five years, with 52.3% lasting 10 years or more. Comparatively, slightly more than 25.6% have been with their current primary lender four our fewer years.

According to the report, 2.3% of the small businesses are in their first year with their current lead lender while 10.5% said their relationship is in the second year.

Of these same respondents, 63.6% said they were with their previous key resource for five years or longer before making a change while 36.4% said their prior relationship lasted four or fewer years.

Slightly more than 45% of the owners or managers said their business has a relationship with one lender and slightly more than 24% have a relationship with two lenders. The remaining 30% have concurrent relationships with three to five lenders. Questions about the quality of the relationships only pertained to the principal lenders.

Additionally, 46.7% of the respondents said their principal lending relationship is with a local bank and 21.1% said the relationship is with a regional bank. Another 26.7% reported a national bank is their chief lender.

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The study also found that among owners and managers of small construction and contracting businesses that:

* Of those using their residence as collateral, 47.5% said that lenders amended their borrowing levels. In those instances, 47.6% increased the credit ceilings and 52.4% decreased the credit amount;

* 21.6% of those responding to the SBRB / Business Today Small Business Lending Relationship and Loan Requirements Study contend higher rates are having the most significant impact on their business. Stricter covenants, mentioned by 16.2%, were the second most significant factor.

The study also indicated that greater expenses to obtain a loan (listed by 15.3%), stricter covenants (14.4%) and increased covenants (14%) also were among the top five lender related issues. They were followed by greater expenses required to comply with loan requirements (9.3%) and the need to upgrade to an audit (6.7%).

This is the fifth in a series of 11 SBRB / Business Today reports examining small business lending relationships and loan needs.

Key findings in the previous reports studied the trends of all small businesses throughout the U.S. and indicated that:

* 26.8% of all respondents will raise their loan requests in 2008 for an increase of 3.5 points from the 23.3% of the small business which elevated their loan levels in 2007;

* Of those business owners using their home as collateral, 42.4% said their lenders had amended their borrowing levels with two-thirds receiving higher credit ceilings and the balance receiving lower credit limits.