We’ve heard how difficult it is for small businesses to secure bank loans, a new Fed report says that banks have been very willing to issue small business credit cards.
About 75 percent of applicants in 2009 were approved for small business credit cards, according to the report. Even among businesses considered high-risk, 72 percent were approved for a credit card.
In general, credit card loan terms are worse than regular loan terms. The average interest rate on a business credit card in 2009 was about 12 percent and cash advance interest rates 20 percent or more, says the report.
Credit card issuers can also change the terms of the loan or revoke credit card lines altogether. Business credit cards are not subject to the consumer protection afforded by the credit card reform bill passed last year.
While over 80 percent of small businesses use credit cards, only 12 percent borrow (carry over a balance from month to month) on credit cards.
If small business owners worry about borrowing on credit cards, they won’t invest in long-term businesses planning or growth, says CNN.com. And that means they won’t invest in hiring, the linchpin in reviving the economy.
This article was submitted by Rohit Arora, co-founder of Biz2Credit. Biz2Credit is a small business marketplace that connects entrepreneurs with financing options and advice to grow their business. Send all questions to