From the fourth quarter Phoenix Management “Lending Climate in America” Survey, results show that lenders anticipate their borrowers making new capital investments, acquisitions and hiring.  Additionally, expectations for loan losses, bankruptcies, unemployment and bank failures are at near all time lows for the survey.

This quarter’s diffusion index, which measures lenders sentiment towards loan losses, bankruptcies, unemployment and bank failures, showed that all four categories have negative diffusion indexes of twenty-three, fifteen, seventeen and seventeen percentage points, respectively.  The negative diffusion indexes in all these categories indicate lenders continue to be optimistic in their outlook for the US economy as it enters 2014. 

In addition, making new capital investments ranked highest amongst responses, at forty-three percent of the lenders surveyed.  Thirty-nine percent (up three percentage points from last quarter) of respondents expect borrowers to start making acquisitions.  Additionally, twenty-seven percent of lenders believe their borrowers will begin to hire new employees as well as start raising additional capital, a nine and two percentage point increase over the prior quarter, respectively. 

“We did see a negative signal from lenders regarding leverage multiples decreasing,” says Michael Jacoby, Phoenix Managing Director and Shareholder.  “In the survey, an overwhelming number of lenders have indicated the highest ratio they would consider is 2.5x to 3x, however, we are still seeing in excess of 3.5x quite frequently in the marketplace.”

To see the full results of Phoenix’s “Lending Climate in America” Survey, click here.