Small businesses have to get credit still. Unfortunately, the credit they can obtain isn’t really within the form of a business loan from a bank or the Small business Administration as much anymore. These days, more small businesses have to rely on credit cards. Unless you’ve a Fortune 500 business, there isn’t funding accessible to you anymore.
Small company credit cards happening more and more
To get their credit, small companies are using credit cards reports CNN Money. Many who apply for business loans are getting denied, but getting approved instead for a credit card. The lowest since 2008, the first quarter of 2010 had $ 40 billion in lending to small businesses. Less than half of small businesses looking for funding in 2009 were really 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 is in the way?
Small companies find a way to get through the first few months with a simple loan from a small bank. The Small business Administration is something that can help as well. However, smaller banks do not have as much liquidity as they used to, and the SBA stimulus funding has run dry. When small company owners are trying to get a loan, they have to put up some collateral, like property. Less credit is accessible now that property isn’t too valuable. The only way to get credit then becomes credit cards. Businesses can’t free up cash with mortgage loan modification when the property doesn’t have anymore value.
Somebody has to have all the benefits
Seven years is the minimum for an short term loan from the SBA. Credit cards, on the other hand, can take forever to settle if one gets locked into making only minimum payments. The difference between regular credit cards and business credit cards is that business credit cards aren’t under the CARD Act. 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. Wait a moment; who was it that got one of the most bailout funds again?
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/
