Small companies can still get credit. This credit doesn’t come as a business loan from a bank or Small business Administration. Now numerous small businesses use credit cards to help. There isn’t very much funding accessible to everyone unless they have a Fortune 500 business these days.
Credit cards for small businesses happening more
According to CNN Money, more small business owners have to rely on their credit cards to get the funding they need. Many who apply for business loans are getting denied, but getting approved instead for a credit card. The first quarter of 2010 saw a reduction of $ 40 billion in lending to small businesses, which is the lowest level since 2008. Less than half of small companies looking for funding in 2009 were actually able to secure a loan of any sort, and as of June of this year, the portion of the stimulus package that was dedicated to small business lending lapsed into oblivion.
What’s stopping it?
Small companies discover a way to get through the first few months with a simple loan from a small bank. The Small business Administration helps also. The SBA stimulus is running dry and smaller banks do not have liquidity anymore. When a business owner applies for a loan, to buy equipment or start a business, they can pledge certain things as collateral, like property. Property is not valued very high anymore making credit less available. The only way to get credit then becomes credit cards. When the property no longer has value, companies no longer can get mortgage loan modification to try and get some cash.
Someone is reaping all the benefits
Seven years is the minimum for an short term loan from the SBA. Credit cards will never be paid off when one starts making minimum payments and never quits. Business credit cards not being under the CARD Act is the only difference between business credit cards and regular credit cards. Big banks are the source of funding for credit cards. Huge amounts of money are lent by JP Morgan Chase, Citibanks, Wells Fargo, and Bank of America. Who got probably the most bailout funds?
Citations
CNN Money
cnn. com/2010/07/14/smallbusiness/bernanke_lending_credit_cards. fortune/
NY Times piece about SBA loans
boss. blogs. nytimes. com/2010/07/11/s-b-a-lending-plunged-in-june/
