October 01, 2009
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Credit Card Industry Barometer, Pt.2
More stout small businesses have evolved.Many of the small businesses still standing have developed more business savvy and have learned healthy ways to manage their credit cards. Many of the small businesses who didn't adapt to the greater wisdom required for credit card (and other types of credit) have become victims of the uncoveted "Darwin Award". The new breed of savvy small business is already making strides in the new arena. The Small Business Administration in Washington, D.C. reports that the volume in business loans has increased by over 60% since March, when averaged weekly. This market is becoming a prime market for credit card lenders like Chase, as it well should.
Bear in mind that this comes at a time when available credit from credit card lenders has dwindled by 50%. These small business have had to become more lean. Expect other credit card lenders to follow this opportunity.
Many, if not most, of these surviving small businesses have become more robust by surviving with less. They've developed a healthy flow between borrowing and paying back. They've become so astute that they could survive on cash-flow alone if they had to. They're no longer ‘teetering-on-the-edge' as they once were, but are now using credit cards for convenience but not reliance. These are the kind of clients that lenders favor.
No doubt, the other large credit card lenders are watching Chase's new small-business ventures with great interest. If they do well, we can expect to see some flood gates open as the competition seek to fill the supply vacuum as quickly as they can in order to get their piece of the pie.
The flood gates have not swung wide open yet, however. We must keep in mind that Neither Chase nor any other large credit card lender is in any position to become careless. For a bank as huge as chase, this initiative is just a trickle. If it bombs, their losses will be very limited. But, if it succeeds, they are in the most excellent position to scarf up on it.