The National Small Business Association has released survey data showing that reliance on credit cards is growing among small businesses. Unfortunately, so, too, is the number of small-business respondents who reported worsening credit-card terms.
“As small businesses across the nation are struggling to keep their doors open, the need for affordable and fair credit-card financing is critical,” stated NSBA President Todd McCracken. “Credit cards account for the largest – and growing – single source of financing being used by small businesses today.”
Conducted between April 27 and May 5, the survey showed that 59 percent of small-business respondents used credit cards in the past 12 months to finance their business, up from 49 percent in December 2008. This increase is occurring despite a rise in the number of small businesses reporting worsening credit-card terms. Asked to evaluate their credit-card terms over the last five years, 79 percent reported worsening terms – up from 69 percent in December 2008. Even more eye-opening: when asked if their credit-card terms had worsened in the last six months, 75 percent reported that they had.
“In previous recessions, economic recovery has been led by the creation of millions of new small businesses,” said NSBA Chair Keith Ashmus. “Unfortunately, today’s entrepreneurs – unlike those of past recessions – are severely limited in their ability to finance a new business by leveraging the value of their home, borrowing from friends and family, or securing a traditional loan. This leaves one clear, often unattractive, option: credit cards.”