Creditors Set their Sights on Small Businesses Once Again
As a small business owner, you may have found the process of obtaining credit over the last few years quite difficult. However, as lenders begin to, once again, lend to consumers, small business owners may also be able to secure a business credit card without too much hassle.
The Past Haunts Small Businesses
In the past, many creditors were reluctant to offer credit to small businesses because many businesses were unable to pay on their balances because of the lackluster economy. As a result, the number of small businesses that rely on credit cards has decreased dramatically.
In fact, according to the National Small Business Administration, nearly 50 percent of all small businesses in the past relied on credit cards. However, over the past year, that number has fallen to just 30 percent, and credit cards are now ranked in third place when it comes to small businesses seeking financing.
Are Small Businesses Ready to Use Credit Cards Again?
Because of the events of the past, couple years and the decreasing number of small business credit card holders, creditors are once again wooing these individuals. They hope that small businesses, now that the economy is improving, will once again return to credit cards as a source of financing. But have small businesses given up on using credit cards?
It is no secret that, in addition to creditors pulling back the number of credit card offers to small businesses, many small businesses cut their ties with credit cards because they weren’t afforded the protection offered to consumers under the CARD Act.
Another factor that is making small businesses wary about applying for a business credit card is that fact that business credit card rates rose faster than any other type of credit card in 2010; meaning that small businesses were being socked for very high interest rates while consumers enjoyed much lower interest rates. In addition, businesses are also not exempt from penalty rates. In other words, one missed payment by a small business could spell catastrophe in terms of their credit card rates.
The jury is still out on whether small businesses will return to credit cards, so creditors must do everything in their power to woo their customers back.
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