Financial Facts Reports on the Growing Tendency Among Banks to Extend Loans to Small Businesses With High Interest Credit Cards

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Financial Facts

"We think small business owners are really the ones that are going to turn around the economy," Richard Quigley. President of Chase Business Cards.

(PRWEB) November 21, 2009

Small businesses seeking loans from banks are being forced to accept corporate credit cards carrying higher interest, Financial Facts reveals.

The number of small business loans in the US for between $100,000 and $1 million fell 23% in 2008, according to an SBA analysis released in May this year.

A recent survey by industry trade group the National Small Business Association (NSBA) found that almost 60% of small business owners had used a credit card in the past year for business capital. Less than half those polled had a bank loan.

Terms of credit card loans less favourable

Financial Facts cites the recession as the primary reason for bank's increasing reluctance to extend loans to small businesses. However, the alternative is fraught with disadvantages for business owners.

Small business loans are complete with an interest rate capped by the government, while credit card loans carry variable interest rates and credit limits that can be cut or changed according the the issuing banks preference.

Financial Facts finds that traditional small business loans are both safer and more cost effective than credit cards.

Small businesses at the helm of economic recovery

Financial Facts points to a decision last month by JPMorgan Chase to unveil an new suite of credit cards for small businesses called 'Ink'.

JP Morgan Chase's own balance sheet reflects a significant drop in lending in recent months. Top analysts at the bank believe small business are leading the fightback from the credit crunch.

"We think small business owners are really the ones that are going to turn around the economy," said Richard Quigley, president of Chase Business Cards.

Chasing the leader

Financial Facts believes UK banks will follow Chase's example in shifting their focus away from small business loans and towards credit card lending to small businesses.

"This is something that we are pursuing because we think it is a significant opportunity," said Quigley.

Financial Facts found evidence on a number of internet forums to suggest the high and variable interest rates were poorly received by small business owners.

References
http://www.financialfacts.org
http://www.mbna.co.uk/business

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