SUPER-FAST-GROWTH
COMPANIES UNFAZED BY RISING INTEREST RATES, PRICEWATERHOUSECOOPERS
FINDS
PricewaterhouseCoopers'
Trendsetter Barometer interviewed CEOs of 341 privately-held product
and service companies identified in the media as the fastest growing
U.S. businesses over the last five years. The surveyed companies
range in size from approximately $5 million to $150 million in
revenue/sales.
Despite rising interest rates, a segment of super-fast-growth
companies completed new bank loans in the third quarter. Hungry
for capital, these new borrowers also expect to explore non-traditional
financing over the next 12 months.
Need for expansion capital trumps cost.
Despite steadily-increasing interest rates, 17 percent of
the nation's fast-growth companies completed new bank loans in
the third quarter, consistent with 16 percent in the second quarter.
Due to recent increases by the Fed, the mean interest rate paid
by these companies was reported to be 6.74 percent-up 46 basis
points from the prior quarter, and 142 from a year ago.
New borrowers are expecting much stronger revenue growth over
the next 12 months than non-borrowers-a 30.6 percent increase
versus 22.2 percent for all others, or 38 percent higher.
To fuel their expansion, more new borrowers than non-borrowers
expect to make major new investments of capital over the next
12 months: 66 percent versus 46 percent, respectively. And, new
borrowers are also more likely to have increased their budgeting
for new products (44 percent versus 37 percent for non-borrowers)
facilities expansion (32 percent versus 24 percent); geographic
expansion (39 percent versus 30 percent); and business acquisitions
(27 percent versus 17 percent).
"New borrowers are on a super-fast track, and cannot support
their ambitious growth plans from cash flow alone," said
Tracy Lefteroff, PricewaterhouseCoopers' global managing partner
of private equity and venture capital. "Because of their
critical need for capital, they are not put off by what may appear
to be a modest quarter-to-quarter increase in its cost."
More Borrowers to Also Explore Non-Traditional Financing.
Thirty-one percent of 3Q 2005 borrowers expect to also explore
non-bank financing options over the next 12 months-up slightly
from 28 percent in the prior quarter. In contrast, only 19 percent
of non-borrowers plan to go this route (off from 23 percent).
|
Borrowers |
Non-Borrowers |
| Venture
Capital |
17% |
7% |
| Private
placement |
15% |
8% |
| "Angel"
Investors |
10% |
12% |
| IPO |
5% |
1% |
| Net
Total |
31% |
19% |
"There's a healthy supply of venture capital out there for
companies with a good deal and a good plan," said Lefteroff.
"This is an excellent time to explore financing options."
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PricewaterhouseCoopers' "Trendsetter Barometer" is developed
and compiled with assistance from the opinion and economic research
firm of BSI Global Research, Inc. If you have a question about
this "Trendsetter Barometer" survey, please contact
Pete Collins, survey director and publisher, at 646-471-4496 or
e-mail to pete.collins@us.pwc.com.
For more information about Barometer surveys, including recent
economic trend data and topical issues, please visit: www.barometersurveys.com
