Find the best credit card offers online.For businesses looking to take out a loan, it seems that options are being whittled down to credit cards only. Many financial institutions are now closing down their other lines of credit, forcing businesses to use credit cards – which usually have a much less favorable set of terms compared to traditional credit lines.
One particularly illustrative example is what major credit card company JPMorgan Chase is doing. Last month, the credit card company introduced a new line of credit cards named Ink. These are four line of credit cards specifically for small businesses carrying interest rates which are as high as 30%. As JPMorgan enticed small businesses with their new small business credit cards, the company began closing down their other small business lending services. The company’s lending through the primary loan program of the Small Business Administration dropped to 80% for this year. This translates to a drop to 1,250 loans for 2009 from the 6,100 loans the company released in 2008.
SBA loans are more attractive to small businesses because they offer a fixed amount of money with an interest rate which is capped by the U.S. government. Credit cards, on the other hand have variable interest rates and have credit limits which can be changed or even cut depending entirely on the whims of the credit card company. Unfortunately, the pattern at JPMorgan is being seen throughout the industry, SBA loans are fast drying up in this economic recession.
Small businesses are now basically limited to credit cards for loan options. A recent survey from the National Small Business Association, or NSBA, shows that almost 60% of small business have tapped credit cards for business capital during the past year. In sharp contrast, the survey shows that, of those who were surveyed, only 45% used a bank loan.
Keith Ashmus, Chair for the NSBA wrote in a report accompanying the survey that, “Today’s entrepreneurs are severely limited in their ability to finance new business ventures 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”.
Small businesses, without access to traditional loans have few choices but to use their credit cards, oftentimes to disastrous results.
Unique Construction, a Detroit home improvement company, owner Charles Brooks is just one of the many small business owners hit hard by these developments. Brook’s company specializes in home improvement. The company has been hard hit by the drop of home values. In 2007 and 2008, Brooks applied for loans with Chase. Both were denied. By the end of 2008, he began paying his business expenses with his credit cards. Now Brooks is looking at almost a dozen cards charged to the limit and he has no idea where to turn to next.
