Research & Data

Texas Service Sector Outlook Survey

Special Questions

October 30, 2012
1. How do borrowing conditions facing your firm compare to those six months ago?
    Oct '10
(percent)
Oct '11
(percent)
Oct '12
(percent)
  Eased substantially 1.9 1.9 1.1
  Eased somewhat 17.5 11.4 11.1
  No change 36.3 32.9 48.9
  Tightened somewhat 12.5 14.6 7.8
  Tightened substantially 4.4 8.9 3.9
  Not applicable–haven’t sought credit 27.5 30.4 27.2

2. To what extent is your business having difficulty obtaining financing for desired long-term uses such as capital expenditures?
    Oct '10
(percent)
Oct '11
(percent)
Oct '12
(percent)
  No difficulty 30.6 32.5 29.4
  Some difficulty 18.8 21.7 23.3
  Substantial difficulty 8.1 5.7 1.7
  Extreme difficulty 3.1 3.8 5.0
  Not applicable–haven’t sought credit 39.4 36.3 40.6

3. To what extent is your business having difficulty obtaining financing for desired short-term uses such as paying workers and acquiring inventories of material or supplies?
    Oct '10
(percent)
Oct '11
(percent)
Oct '12
(percent)
  No difficulty 35.8 37.3 36.3
  Some difficulty 11.9 9.5 14.0
  Substantial difficulty 3.8 3.2 1.1
  Extreme difficulty 2.5 2.5 4.5
  Not applicable–haven’t sought credit 45.9 47.5 44.1

4. Has your firm’s production and/or sales been adversely affected by difficulty obtaining credit?
    Oct '10
(percent)
Oct '11
(percent)
Oct '12
(percent)
  Yes–significantly 6.9 5.1 5.0
  Yes–somewhat 14.5 14.6 10.6
  No 36.5 38.0 37.2
  Not applicable–haven’t had problems obtaining credit 10.1 8.2 9.4
  Not applicable–haven’t sought credit 32.1 34.2 37.8

5. Has your firm reduced hiring and/or increased layoffs due to difficulty obtaining credit?
    Oct '10
(percent)
Oct '11
(percent)
Oct '12
(percent)
  Yes–significantly 3.8 3.2 2.8
  Yes–somewhat 8.8 13.9 10.6
  No 46.9 39.9 42.5
  Not applicable–haven’t had problems obtaining credit 8.8 8.9 7.8
  Not applicable–haven’t sought credit 31.9 34.2 36.3


Texas Retail Outlook Survey

Texas Retail Outlook Survey

Special Questions

October 30, 2012
1. How do borrowing conditions facing your firm compare to those six months ago?
    Oct '10
(percent)
Oct '11
(percent)
Oct '12
(percent)
  Eased substantially 1.9 2.2 4.1
  Eased somewhat 19.2 17.4 14.3
  No change 38.5 30.4 55.1
  Tightened somewhat 11.5 19.6 10.2
  Tightened substantially 3.8 4.3 2.0
  Not applicable–haven’t sought credit 25.0 26.1 14.3

2. To what extent is your business having difficulty obtaining financing for desired long-term uses such as capital expenditures?
    Oct '10
(percent)
Oct '11
(percent)
Oct '12
(percent)
  No difficulty 34.6 37.0 38.8
  Some difficulty 15.4 28.3 26.5
  Substantial difficulty 9.6 4.3 2.0
  Extreme difficulty 0.0 4.3 8.2
  Not applicable–haven’t sought credit 40.4 26.1 24.5

3. To what extent is your business having difficulty obtaining financing for desired short-term uses such as paying workers and acquiring inventories of material or supplies?
    Oct '10
(percent)
Oct '11
(percent)
Oct '12
(percent)
  No difficulty 36.5 47.8 49.0
  Some difficulty 13.5 15.2 14.3
  Substantial difficulty 3.8 0.0 2.0
  Extreme difficulty 1.9 4.3 8.2
  Not applicable–haven’t sought credit 44.2 32.6 26.5

4. Has your firm’s production and/or sales been adversely affected by difficulty obtaining credit?
    Oct '10
(percent)
Oct '11
(percent)
Oct '12
(percent)
  Yes–significantly 7.7 2.2 6.1
  Yes–somewhat 15.4 17.4 14.3
  No 40.4 43.5 42.9
  Not applicable–haven’t had problems obtaining credit 9.6 13.0 16.3
  Not applicable–haven’t sought credit 26.9 23.9 20.4

5. Has your firm reduced hiring and/or increased layoffs due to difficulty obtaining credit?
    Oct '10
(percent)
Oct '11
(percent)
Oct '12
(percent)
  Yes–significantly 3.8 4.3 6.1
  Yes–somewhat 7.7 17.4 16.3
  No 51.9 41.3 44.9
  Not applicable–haven’t had problems obtaining credit 7.7 13.0 12.2
  Not applicable–haven’t sought credit 28.8 23.9 20.4

Survey collection period: 10/9/2012–10/12/2012


Special Questions Comments

Special Questions Comments

These comments have been edited for publication.

Merchant Wholesalers, Durable Goods

  • It is our opinion that financial institutions have a surplus of cash to lend but are reluctant to lend for various policy and regulatory reasons. These policies have stymied both the economy and growth of the economy. During the last several years, our company has experienced tremendous difficulty identifying lenders to refinance real estate with significant equity and lenders for working capital or equipment loans. During negotiations, banks are pushing many of the limits, over-collateralizing loans, requesting personal guarantees and making it exceedingly hard to borrow. On top of difficult lending requirements, banks are passing through all conceivable costs and expenses to exercise transactions. In addition, banks have increased their expenses and fees and passed them on to the borrower. Our vendors and customers are experiencing these same issues. The economy is suffering from current regulations that cause paralysis in the economy.
  • Our firm has had no difficulty obtaining the credit we need to run our business or acquire/build long-term capital purchases/facilities.
  • We are not seriously affected by credit conditions; however, our customers—mostly small businesses in the energy and manufacturing sectors—are affected.

Merchant Wholesalers, Nondurable Goods

  • While we understand our bank’s hesitation, it nevertheless makes it difficult to operate. We really do not see things getting better in the next year or so in the lending market. It is going to be a tough slog for all of us. We just need to stay close to our bankers and let them know how we are doing and what we are looking for. This is frustrating for all parties.

Motor Vehicle and Parts Dealers

  • We are not looking at large projects and are holding onto and building cash because of so many uncertainties like the increasing federal debt, the seemingly perpetual uncertainty about taxes, double-digit recession fears and the cloudiness of what is really going to happen with regards to health care and insurance. Where are the days when you worried about where your next sale was coming from instead of about the next gotcha for new taxes or new audits for unseen tax pitfalls?

Furniture and Home Furnishings Stores

  • Lending restrictions must be eased back to stimulate qualified companies and individuals in capital spending, new home construction and major remodeling.

Building Material and Garden Equipment and Supplies Dealers

  • We have not had trouble obtaining credit, but the process has become more burdensome.
  • Banks go from one extreme to the other: In good times you ask for $1 million and they want to give you $2 million; in bad times you want $1 million and they want to give you $300,000. This is not good for the economy. They turn the faucet on full blast and then turn it off. It needs to be a slower process.
  • We are experiencing slow sales and have reduced hiring due to a lack of new construction in our market area. This is, to some degree, due to difficulty our customers are having obtaining credit. The larger problem seems to be that everyone is waiting for the election and fiscal cliff issue to be resolved.
  • Lenders are still cautious and have every reason to be. However, it is disheartening when your bank that you've had relationships with for over 30 years rakes you over the coals to extend your line of credit that in our mind is secured with inventory, accounts receivables and personal guarantees.
  • Fortunately, we have never sought credit and have had enough cash flow to operate our company without borrowing.

General Merchandise Stores

  • Though we have not sought additional credit in the last six month, we have had discussion with various banks regarding refinancing. It would appear that there is no capacity issue and pricing is better than six months ago.

Truck Transportation

  • We have a strong financial position, balance sheet and cash flow and love our long relationship with our bank. We don't typically use debt for short-term needs.

Publishing Industries (except Internet)

  • We have credit lines available from last year but have not drawn on them, nor have we sought more in the last six months.

Credit Intermediation and Related Activities

  • With a few notable exceptions, most credit unions are highly liquid due to depressed loan demand over the past three years. While there has been some marginal improvement in loan demand, consumers are still very wary of new credit commitments. Due to this high level of liquidity, the majority of credit unions have not required any outside sources of borrowing.
  • As a bank, we have lots of liquidity. Loan demand remains soft.
  • We are a local bank and have never requested credit.

Securities, Commodity Contracts, and Other Financial Investments and Related

  • Our collateral, business history and prospects are very good and solid. We are being asked needless questions during a refinancing of an existing loan. Our observation is that only credit customers with the highest ratings will be able to secure necessary and needed financing.

Insurance Carriers and Related Activities

  • Refinancing our owner-occupied real estate with our core banking relationship has not been successful.
  • Credit is available. However, due to low interest rates, projects with worthwhile returns are few.
  • Our consumers have had difficulty obtaining credit for real estate transactions, which has reduced our volume.

Rental and Leasing Services

  • Financing and banks are not the problem; overbearing regulation is the problem. We cannot tell you if we are going to lay anyone off until after the election.

Professional, Scientific, and Technical Services

  • The business climate continues to be tentative. The hesitation of buyers and sellers is hurting small businesses.
  • Credit is not the issue at least for us. What is holding us back is fear of the unknown. We will continue to be ultraconservative until such time as we feel we can confidently reinvest without fear of new regulations, taxes and penalties.
  • Currently we are having little difficulty in obtaining necessary financing as we have a substantial line of credit in place along with a more than 60-year business history.
  • We have had no difficulty getting credit for equipment upgrade and vehicle purchases. We have not tried or need to get short-term credit.
  • We are reluctant to hire because we don't know what is going to happen in the economy, especially with looming tax increases. Credit is not a problem; we have plenty of credit available.
  • Due to our client's inability to get funding, we are implementing salary reductions across the firm to stave off staff reductions.
  • Overregulation appears to be a nightmare for all the smaller banks we talk with, and the larger banks won't lend money unless we can match it with cash on hand. It's tough out there for a borrower.
  • We are debt free and haven't had a need for credit. Our balance sheet is strong, and we do not believe we would have difficulty obtaining credit.
  • We rarely use credit in our company. We do carry a $2 million line of credit that we renew annually. No problems there. We also work for a major bank, and we know they are very aggressive in seeking loans from qualified middle market companies. We don't see any reluctance on their part. We work hard with them to attract business borrowings. We’d say the operative word is "qualified" when it comes to loan commitments.

Administrative and Support Services

  • Lenders are making consumer loans for autos, electronics, etc., but not home loans. Acceptable credit scores vary, and some ignore relevant factors. If the congressional criteria for a qualified residential mortgage are too stringent, lenders will withdraw more, especially faced with new regulations, and the housing market will slow substantially.
  • We have stopped using credit other than credit cards since 2008 as we pay cash for all company investments.
  • About the only time we have borrowed is for acquisitions. Those have been few and far between.

Ambulatory Health Care Services

  • Banks are requiring a very high level of credit rating, i.e., tying up the entire personal and company-related assets into any kind of credit line extension and limiting our options to run our company business lines. Despite low interest rates, the requirements from the banks are causing significant enough headaches that small business owners are limiting their intent to hire and expand business.
  • We finance our capital need internally; therefore, we are not in a position to answer questions about credit availability.
  • We are purchasing a new MRI scanner in November costing over $1 million. Our bank would only finance half the cost, so we used private financing and a large down payment to complete the purchase.

Accommodation

  • We are able to finance via working capital. However, conditions and outlook could change anytime soon. We are carefully monitoring current conditions before making any decisions about future building projects.
  • We are privately owned and funded; hence, we have not had the need to borrow recently.

Food Services and Drinking Places

  • We are doing well and have not needed any additional funding.
  • We have financing pending on one long-term project—a new store—but it looks very favorable, and we have been given the impression from the first meeting with the bank that the loan will be approved. So, it is not a done deal yet, but it appears that indicating "no difficulty" in obtaining long-term financing is the correct response; we haven't asked anyone for any form of short-term financing.

Religious, Grantmaking, Civic, Professional, and Similar Organizations

  • We are a not-for-profit organization and finance activities from our reserves.

Questions regarding the Texas Service Sector Outlook Survey can be addressed to Amy Jordan at amy.jordan@dal.frb.org.

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