If you think President Obama's bid to reform credit card interest rates, penalties and fees will impact only individual consumers, think again.
A report from the National Small Business Association shows that credit card use among America's small businesses is soaring. Fifty-nine percent of small-business respondents have used credit cards in the past 12 months to finance their business, up from 49 percent in December 2008. That increase comes at a time when 75 percent of small businesses say their credit-card terms have worsened in the last six months.
The problem shows exactly how far-reaching the economic downturn has become. Consumers are spending less, leaving small businesses with less cash on hand. That forces businesses to use their credit cards to keep things humming … and at a time when credit-card terms are worsening.
It's even more daunting for people who are thinking of starting a small business.
“In previous recessions, economic recovery has been led by the creation of millions of new small businesses,” the NSBA writes. “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.”
Not surprisingly, the NSBA supports efforts to reform credit card rates and fees.
Do you?