Small Businesses Hugely Reliant on Credit Cards

Washington — The National Small Business Association today released data showing that reliance on credit cards is growing among small businesses. Unfortunately, so, too, is the number of small-business respondents who reported worsening credit-card terms. The NSBA 2009 Small Business Credit Card Survey provides a detailed view of how small businesses are utilizing their credit cards, how their credit-card companies are treating them, and the impacts of deteriorating credit-card terms on their business.

"As small businesses across the nation are struggling to keep their doors open, the need for affordable and fair credit-card financing is critical," stated NSBA President Todd McCracken. "Credit cards account for the largest–and growing–single source of financing being used by small businesses today."

Conducted between April 27 and May 5, the survey showed that 59 percent of small-business respondents used credit cards in the past 12 months to finance their business, up from 49 percent in December 2008. This increase is occurring despite a rise in the number of small businesses reporting worsening credit-card terms. Asked to evaluate their credit-card terms over the last five years, 79 percent reported worsening terms–up from 69 percent in December 2008. Even more eye-opening: when asked if their credit-card terms had worsened in the last six months, a whopping 75 percent reported that they had.

The NSBA 2009 Small Business Credit Card Survey comes on the heels of passage of critical credit-card reform legislation in the U.S. House of Representatives and in advance of expected debate on a similar measure in the U.S. Senate. NSBA has been an active and outspoken proponent of credit-card reform, citing the ever-increasing reliance small businesses have on credit-card financing.

"In previous recessions, economic recovery has been led by the creation of millions of new small businesses. Unfortunately, today’s entrepreneurs –unlike those of past recessions — are severely limited in their ability to finance a new business by leveraging the value of their home, borrowing from friends and family, or securing a traditional loan. This leaves one clear, often unattractive, option: credit cards," said NSBA Chair Keith Ashmus of Frantz Ward LLP in Cleveland, Ohio.

NSBA urges the Senate to enact S. 414 and ensure that its protections are extended to the cards used by America’s small-business owners. Given some of the bleak results of this survey and small business’ historic role in lifting the nation out of recessions and depressions, it is an economic imperative that Congress reform the practices of the credit-card industry.

Please click here to view The NSBA 2009 Small Business Credit Card Survey.

Since 1937, NSBA has advocated on behalf of America’s entrepreneurs. A staunchly nonpartisan organization, NSBA reaches more than 150,000 small businesses nationwide and is proud to be the nation’s first small-business advocacy organization. For more information, please visit www.nsba.biz