Credit Cards Crunching Small Business Owners
Posted by: John Tozzi on July 11, 2008
I just caught this piece by Simone Baribeau in the Washington Post last week on small business owners caught in credit card debt:
Entrepreneurs have long used credit cards as quick financing. But with the sputtering economy, tightening credit market and cards’ notoriously changing terms, more small business owners are struggling to pay their debt, accumulated on personal as well as small-business credit cards.
As credit standards loosened at the beginning of the decade, banks expanded their small-business credit card offerings. Compared with the consumer credit card market, the small-business market was virtually untapped and potentially lucrative, because business credit card use tends to be high volume and paid in full at the end of the month.
The result was a boom: Small businesses will charge 2 1/2 times more this year than they did in 2002, when credit card charges ran about $140 billion, according to estimates from TowerGroup, a financial service research and advisory firm.
A few months ago, an entrepreneur emailed me to say he had stopped using plastic completely because of rising fees and interest rates. It’s difficult for me to imagine how most businesses could function without credit cards. But have any other small business owners cut up their cards after piling up credit card debt? If you have, drop me a note at john_tozzi [at] businessweek [dot] com.