By the Numbers – CFA data shows US companies credit utilization/committed facilities improves

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For those of you who don't know the Commercial Finance Association (CFA), it is the international trade association dedicated to the asset-based lending and factoring industries. The CFA was founded in 1944, and has nearly 300 member companies and 16 chapters located throughout the United States, Mexico and Canada. CFA members include a diverse collection of lending institutions that range from international banks to independent entrepreneurial finance companies. The membership is comprised of 24% banks and 76% non-bank financial institutions, including asset-based lending units of domestic and foreign commercial banks.

They do a quarterly survey based on information provided by 27 of the nation’s top asset-based lenders. They measure two things:

  1.      Credit utilization of their members submitting data and
  2.      Value of committed credit facilities.

They then compare this data in a trend series.

The recent survey (CFA released its Quarterly Asset-Based Lending (ABL) Index for Q2 2014 in August) had the following key findings:

  • The Index for Q2 2014 shows credit utilization at highest levels in 22 quarters as many U.S. companies remain optimistic but cautious. U.S. businesses utilized 43.1% of their credit lines during the 2nd quarter, an increase of two full percentage points from the first quarter.
  • While credit line utilization has consistently increased over the past four years, but companies continue to utilize credit at levels significantly below levels in the years before the financial crisis when utilization of credit lines by U.S. businesses was generally higher than 50%.
  • Total committed credit lines amounted to nearly $204 billion at the end of the Q2 2014, a growth of 1.6% over the previous quarter and 6.0% over the same period one year ago. According to Robert Trojan, CFA chief executive officer, “Asset-based lending activity clearly picked up during the second quarter of this year and we look for this trend to continue as U.S. firms gain confidence and expand their business.

While the data collection is voluntary, it would be good to have an independent auditor actually collect this information as opposed to being survey based. This is important data. Just like retail sales at Walmart provide real-time feedback on the health of certain consumers, so does credit utilization and growth provide feedback on commercial business credit. Still, we are thankful to the CFA for having some time series data to show us the state of middle corporate America's access to bank and non bank credit.

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