February 10, 2005 -- Small American companies are raising their revenue forecasts for the coming year, and may avoid bank loans and look into non-traditional financing, a new PricewaterhouseCoopers survey reported this week.

The survey, which focused on "trendsetter" firms -- 360 fast-growing private companies with revenues between $5 million and $150 million -- during the fourth quarter of 2004, paints an optimistic picture of the economy. Margins were up for 31% of companies surveyed, and down for just 15%, while 24% increased their prices (7% decreased them).

However, interest rates spiked upward -- the average in the fourth quarter was 5.73%, up 41 basis points from the third quarter -- and 22% of businesses increased their credit lines by, on average, 10.4%. That may explain why 32% of those surveyed expect to look at non-bank financing, including angel investors (an option for 18% of CEOs surveyed), venture capital (18%), private placement (15%), and IPO (3%).

What's that money going toward? Well, growth, for one -- new borrowers grew 568% over the past 5 years, versus a growth rate of 251% for non-borrowers. Moreover, the new borrowers expect to see 46% stronger revenue growth in the coming year than non-borrowers. They'll be investing their capital in IT, new product and service development, advertising, and sales promotion, they reported. Whether those high interest rates will pay off remains to be seen.