If so, you probably know the bad news already. As noted in The New York Times (6/19/09), “As of April, 59 percent of America’s small firms relied on credit cards to help finance their day-to-day operations, up from 44 percent at the end of last year, according to the National Small Business Association. The number of small business owners who depend on a credit card to buy everything from paper clips to heavy equipment has climbed steadily over the years....
“But credit card terms have worsened sharply with the recession: three-quarters of small business (owners surveyed) said they have seen a drastic cut in limits over the past six months” while banks and other lenders have also pulled back significantly. In addition, the new federal legislation to reduce credit card abuse, effective next year, does not cover small businesses, which—the credit card industry claims—account for even more delinquencies and charge-offs than individual cardholders. So they’ve had to reduce their risk. One card issuer, Advanta, originally formed to offer credit cards exclusively to small businesses, recently cancelled new credit for its cardholders and/or increased the interest rate it charged.
If you run a small business and have not yet seen a reduction in the credit line on your credit card(s) or a dramatic jump in interest rates, be prepared; it could happen without warning. Therefore, you may want to: apply for other credit cards; consult with your accountant and a local banker; stop relying on credit cards to pay for supplies, inventory, payroll, etc.; reduce the amount of credit you extend to customers; offer a special discount to open-account customers who pay cash; ask your suppliers for more time to pay your bills.
