July 14, 2010
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Sm Bus CC Use Impact On Economy, Pt.2
Building a case for small businesses.The Keybridge report highlighted a survey that was recently conducted by the National Federation of Independent Businesses. This survey revealed that only 33 percent of small businesses were recipients of any credit card offer with satisfactory terms and only 39 percent of loan applications by small business have been approved. Although 75 percent of small business owners obtain a credit card, these cards typically carry very high interest rates and up to 30 percent in some cases. Without these loans, small businesses have been forced to turn to the high interest rate cards to meet the day to day expenses of doing business. Another survey was cited in the Keybridge study which was conducted by the National Small Business Association 2009 survey. This survey revealed that 59 percent of U.S. small businesses use their high interest cards to meet capital needs. Furthermore, 33 percent of the recipients indicated that credit card debt accounts for over 25 percent of their overall debt.
Further research indicates that for every one percent increase in small business credit card use, the nation experiences a 0.051 percent increase in company employment and 0.144 percent increase in company revenue. Break that down into simple terms; for each increase of $5,613 in small business card spending in a month, a new job is created. Additionally, evidence indicates that the increase in small business credit card lending during the years between 2003 and 2007, the U.S. experienced a cumulative increase in the U.S. economy of $142 billion. This amounts to 25 percent of the total U.S. GDP.
Despite the obvious contributions to the nation’s economic growth and stability, research shows that the small business credit card growth rate actually decreased in 2009 by 9.6 percent. Experts say the decrease is due to a lack of access. There are several elements that have prevented small businesses from having access to cards that offer fair terms and interest rates. Keybridge lists them as: market structure, macroeconomic conditions, and regulatory policies. With respect to all three of these conditions, the small business community has been affected at all three stress levels and thereby having a negative effect on the U.S. economy and the jobless market.