May 7, 2009
-
News: Small Business CC Interest Rising
Just when consumers are on the verge of seeing some long awaited credit card reform legislation go into effect to protect their personal accounts, small business are being hit with some of the same unfair practices by the financial industry. The National Small Business Association (NSBA) released the results from a survey taken by small business members. The survey which queried 288 NSBA members indicated that almost 2/3 of the respondents experienced an interest rate increase on their business credit card within the past 12 months. Furthermore, 41% of the survey respondents stood by helplessly as lenders slashed their credit limits. Small business owners are asking some of the same questions personal consumers have been asking: Why are we saddled with higher interest rates when banks are borrowing taxpayers’ money at some of the lowest rates in history? Many believe it’s the banks latest attempt to increase profits in the wake of suffering huge losses from credit card delinquencies and defaults.
The news comes as no surprise since many small businesses have resorted to credit card use to fund daily operations because lenders have cut business lines of credit and have made it more difficult to close on business loans. Now that card usage has virtually replaced other standard forms of financing, small business owners are not paying off balances each month. The NSBA survey results indicate that 60% of small business owners are carrying forward a monthly balance. Of that total, 37% are carrying over $10,000. Additionally 33% of the respondents say their credit card debt amounts to 25% of the company’s total debt. This opens up a window of opportunity for banks who are taking advantage of the situation to make up lost revenue.
Legislation that has recently passed through the House and currently circulating through the Senate to ban deceptive and unfair practices by credit card companies does not have provisions to cover small businesses. It appears small business owners will need to start banging at the doors of lawmakers to wage yet another war against the financial industry. For now, some might advise small business owners to explore the option of using their personal accounts.