Small businesses have to get credit still. Unfortunately, the credit they can obtain is not in the form of a business loan from a bank or the Small business Administration as much anymore. These days, more small companies have to rely on credit cards. A lot of funding that used to be readily accessible for small companies just isn’t really there anymore, and unless you are running a Fortune 500 company, it is hard to get the help you need.
Small business credit cards booming
To get their credit, small businesses 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 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 company lending lapsed into oblivion.
What’s keeping lenders away?
The normal way a small business gets a loan to get off the ground, or help them expand, is through either a small or mid-size bank. There is also the Small business Administration. The SBA stimulus is running dry and smaller banks do not have liquidity anymore. When a business owner applies for a loan, to purchase equipment or start a business, they can pledge certain things as collateral, like property. Since property isn’t really as valuable anymore, less credit is going to be made available. Credit cards then become the only source of credit accessible. Companies can’t free up cash with mortgage loan modification when the property doesn’t have anymore value.
Someone has to have all the benefits
Seven years is the minimum for an installment loans for bad credit from the SBA. If one starts making minimum places only, credit cards will never get paid off. The difference between the credit card that John or Jane Q. Public has and a business owner has is that a business credit card is not covered by the CARD Act. Credit cards are funded mostly by big banks. Bank of America,JP Morgan Chase, Citibank and Wells Fargo all lend huge amounts of money on credit cards. Wait a moment; who was it that got probably the most bailout funds again?
Discover more information
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/
