Credit cards are desperately needed by small companies

Small companies can nevertheless get credit. This credit doesn’t come as a business loan from a bank or Small business Administration. Now many small businesses use credit cards to help. There isn’t very much funding accessible to everyone unless they have a Fortune 500 business these days. Source of article – Small businesses relying more on credit cards by Personal Money Store.

Many more small business credit cards

To get their credit, small companies are using credit cards reports CNN Money. Companies are approved for credit cards as easily as they’re denied for business loans. The first quarter of 2010 saw a reduction of $ 40 billion in lending to small businesses, which is the lowest level since 2008. Since June this year, there is no more money for lending in the stimulus package, and in 2009, not even half of small businesses got the lending they needed.

What’s keeping banks from lending?

The normal way a small company gets a loan to get off the ground, or help them expand, is through either a small or mid-size bank. The Small business Administration helps also. However, smaller banks don’t have as much liquidity as they used to, and also the SBA stimulus funding has run dry. Things are put up as collateral, like property, when business owners apply for a loan. Since property is not as valuable anymore, less credit is going to be made accessible. Credit cards then become the only source of credit accessible. If a piece of property isn’t really as valuable anymore, it’s hard for a business to get mortgage loan modification to free up cash.

Someone is reaping all the benefits

An short term loan from the SBA contains a minimum term of seven years. If one starts making minimum places only, credit cards will never get paid off. Business credit cards not being under the CARD Act is the only difference between business credit cards and regular credit cards. Big banks are the source of funding for credit cards. Citibank, Wells Fargo, Bank of America, and JP Morgan Chase are some of the banks that lend a lot to credit cards. Who got one of the most bailout funds?

More information 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/