Credit remains hard to come by, according to GreenwichAssociates' latest survey of small to midsize U.S. companies. Infact, 86% of the smallest companies–those with annual revenue of$10 million or less–told Greenwich in September that it wasbecoming harder to secure credit in the third quarter, up from the68% that expressed that view in July.

Among midsize companies, those with annual revenue of $10million to $100 million, 65% said it was becoming harder to securecredit in the third quarter, unchanged from the view in the secondquarter.

The bleaker assessment by smaller companies reflects the factthat banks regard them as riskier, says Chris McDonnell, aconsultant at Greenwich Associates. “In large terms, everyone isfinding it more difficult to borrow, it's just accentuated for thesmaller companies that represent a greater risk for the banks,”McDonnell says. “Overall, the financial health of companies isdeclining, which is raising their risk profile in the eyes of thebanks, who are far more conservative or risk-adverse today than ayear ago.”

It turns out, though, that despite their pessimistic view, 46%of the smallest companies had borrowed in the three monthspreceding the September survey, up from 37% in the July survey.

The Greenwich survey also shows more companies are switchingbanks or considering doing so in the current economic environment.According to the survey, 25% to 30% of the small and midsizecompanies have switched banks in the last year. And 60% of thecompanies said they are looking for new banks or would considerchanging banks if they got a good offer; that's up from 40% thatsaid they were open to switching in the second quarter.

Some of the turnover reflects consolidation in the bankingindustry, McDonnell says. “Other factors includeself-preservation,” he says. “There's a sharp decline in theimportance of loyalty right now and companies are looking topartner with anybody who will provide them with capital.”