Most Companies Exceed Their Credit Limit

Approximately 65 percent of companies exceed the credit limits on their business accounts, and 35 percent also do so on their personal accounts, a survey by the Federation of Israeli Chambers of Commerce has found.

Nevertheless, 55 percent of the executives whose companies belong to the FICC support a new directive by Supervisor of Banks Yoav Lehman forbidding bank customers from exceeding their credit limits - even though 70 percent of the companies surveyed said this would make their lives more difficult. The directive is slated to take effect in January 2006.

The study covered 100 private-sector trade and service companies. Of those that expressed concern over Lehman's directive, 70 percent said they would try to obtain loans from other sources. In addition, 26 percent said they would reduce spending, 19 percent would fire workers, 15 percent would raise money "in-house" and 8 percent would consider moving their companies to somewhere with lower costs.

As for the use the companies make of their excess credit, the study found that 39 percent employ the money for working capital and ongoing expenses, while 24 percent use it to pay tax and utility bills. Another 20 percent use it to pay salaries, and 17 percent use it for other purposes, such as paying suppliers.

FICC president Uriel Lynn said that Lehman's directive was liable to make life harder for many businesses. At the same time, he said, it is likely to protect them from uncontrolled expansion.