A Greenwich Associates survey of U.S. companies reveals that companies of all sizes and credit ratings are seeing their access to both short and long-term financing sharply diminished. In past market downturns, U.S. banks have drastically pulled back on their credit commitments to the least qualified borrowers, but they largely continued to generate revenues by extending loans to companies with solid, investment-grade ratings.

"What we are now experiencing is something different and deeper than perhaps anyone imagined," says Greenwich Associates consultant Steven Busby. "This is a true crisis of liquidity — even the strongest companies are struggling to get short-term financing. It may not be long before companies are forced to curtail operations due to lack of funding and the full consequences of this crisis become evident in the broad economy."

Greenwich Associates surveyed 291 companies about how the current market turmoil is affecting their ability to secure credit. Interviews were conducted via the Internet from Sept. 16 to Sept. 24. The research results reveal that U.S. companies foresee a deep and long economic downturn, that the flow of credit to U.S. companies of all sizes and credit strength has dwindled, and that companies able to secure credit are paying a steep price.

Almost a quarter of U.S. companies say these historic shifts in credit conditions have increased their needs for credit to fund ongoing operations. Smaller companies are feeling the pinch the most. One third of companies with annual sales of $500-999 million say market turbulence has increased their need for operational funding. Among the industries with the highest proportion of companies saying they've experienced an increased need for operational funding are consumer goods (36%), industrial/transportation (28%) and financial institutions (26%).

Forty-two percent of large U.S. companies also say their ability to secure revolving credit facilities has decreased or significantly decreased as a result of the current crisis in global credit markets, and more than two thirds say pricing on these facilities has increased. Hardest hit have been companies with credit ratings of BB or below, more than half of which say their access to revolving credit facilities has been reduced. "Again, even among the largest companies in the United States — those with more than $5 billion in annual sales — 43% say their ability to access revolving credit facilities had decreased," says Greenwich Associates consultant John Colon.

The story is much the same with term loans, with 52% of companies overall saying their access has been reduced and almost three quarters saying their pricing has increased or increased significantly. Among the smallest companies in the survey — those with annual sales of $500-999 million — three quarters say it has gotten more difficult to secure term loans, as do 60% of companies with below-investment-grade credit ratings.

The liquidity crisis is also choking off companies' access to long-term bond markets. Sixty-two percent of companies say their ability to issue long-term bonds has been curtailed, including 64% of companies with more than $5 billion in annual sales. Seventy-seven percent of companies say pricing on long-term bond issues has increased, including 30% saying their costs of funding have increased "significantly." It is interesting to note that companies with investment-grade ratings are more likely than their lower rated counterparts to say they've experienced an increase in pricing on their long-term bonds, at 83% to 66%.

"These findings tells us that investment-grade companies at least had some opportunity to obtain short-term and long-term funding , even if they had to pay a steep price for their funding," says Greenwich Associates consultant Jay Bennett. "By contrast, the high yield market has essentially shut down."

• Only 4% of companies think the economy will turn positive in the next six months; 47% expect the slowdown to last for 18 months or longer.

• Not a single company with annual sales of less than $1 billion thinks there's any possibility of an economic rebound in the next six months.

• Mid-sized companies are especially gloomy in their outlook. Among companies with annual sales of $1-5 billion, nearly 50% say the economy will not begin to recover for at least the next 18 months.

• Demand for the funding of capital expenditures is slowing. Sixteen percent of U.S. companies — including a quarter of consumer products companies and almost 25% of natural resource companies — say current market conditions have led to a decrease in their need for cap-ex financing. "Although 13% of companies say their capital expenditure funding needs have increased, the net result is a reduction in demand, a clear indicator of an economic slowdown," says John Colon.