Small companies rely heavily on credit cards

Small businesses have to get credit still. This credit doesn’t come as a business loan from a bank or Small business Administration. These days, more small companies have to rely on credit cards. Unless you’ve a Fortune 500 business, there isn’t funding available to you anymore.

Tons of small business credit cards

Credit cards are what, according to CNN Money, small company owners are relying on to get credit. Businesses are approved for credit cards as very easily as they’re denied for business loans. The lowest since 2008, the first quarter of 2010 had $ 40 billion in lending to small businesses. In 2009, less than half of small companies could get lending, and there is no more stimulus for lending since June.

What’s keeping lenders away?

Small companies discover a way to get through the first few months with a simple loan from a small bank. There is also the Small business Administration. Smaller banks don’t have the liquidity to lend and the SBA stimulus has nothing left. Things are put up as collateral, like property, when business owners apply for a loan. Since property isn’t as valuable anymore, less credit is going to be made available. 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 uses all the benefits

Seven years is the minimum for an short term loan from the SBA. If one starts making minimum places only, credit cards will never get paid off. The main 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. Bank of America,JP Morgan Chase, Citibank and Wells Fargo all lend huge amounts of money on credit cards. Who got the most bailout funds?

More details available at these websites

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/