Did Your Small Business Credit Card Terms Change?

It's true. The National Small Business Association (NSBA) survey reports that in the past year, credit card companies have spiked interest rates, lowered limits or both. 75 percent small business owners responding to the survey say credit card terms are worse. The survey also shows that fewer businesses pay off credit cards every month with only 40 percent doing so. When a business doesn't pay off the credit card, it could see its terms worsen. The Small Business & Entrepreneurship Council says that almost half of all small businesses use credit card for financing due to limited funding options.

With the economy's current situation, more business owners must rely on credit cards for finance rather than mortgaging homes or borrowing from family and friends. A surprising 1 percent turned to invoice financing. It could be small business owners aren't aware of this option. Invoice financing has a lower risk compared to other available options because the business is selling what it already earned rather than borrowing money it has to pay back.

What's scary about the report is that a third of respondents stated they received their credit card statement after the due date. Even if you can't pay off the business credit card, make an effort to at least pay the minimum amount BY the due date.

Over half of small businesses responding to the survey feel pressured to get capital through their credit cards or else they can't grow or have to let go of employees. 43 percent report cutting employee benefits. If small businesses manage to land capital, most would use it to hire more employees and buy new equipment or plant.

NSBA is lobbying the Senate to approve the Landrieu-Snowe Amendment to the Credit CARD Act of 2009 (H.R. 627/S. 414). This amendment puts safeguards in place to protect small business owners from abusing credit card terms.

Credit card lender Advanta Corp. is closing all of its cardholders' accounts in an attempt to avoid going out of business. Growing missed payments forced Advanta to raise its interest rates, but it isn't enough to dig out of the hole.

Before obtaining capital through a credit card, investigate other options from private lenders (not banks) and fixed-rate funding. They might offer better terms than a credit card without the risk that comes with mortgaging your home.

What experiences have you had with your credit card or other financing solutions?