A Sharp Drop in 'We'll Just Put It on the Card.'(small Business Credit Cards)
Stoneman, Bill, American Banker
Small-business owners aren't whipping out their credit cards as often these days.
Recent surveys show that the use of personal credit cards for business financing-long a mainstay for entrepreneurs who couldn't get a traditional bank loan-has fallen in recent years.
While entrepreneurs still heavily rely on plastic for start-up costs and small equipment purchases, traditional bankers are starting to welcome once untouchable commercial customers more readily. And the bankers are even taking on those who may have relied on their cards too much.
"We look at the cash flow-'Does this business have ability to repay and the intent to repay?'" said Raj Madan, director of marketing for business banking with Barnett Bank in Jacksonville, Fla. "Most of the time we view that potential borrower as an opportunity."
In a 1996 study by the National Federation for Women Business Owners, 23% of the 800 small-business owners surveyed said they used credit cards to finance their companies. The figure was 51% in 1994 and 52% in 1992.
In another survey, conducted last year by Dun & Bradstreet in Murray Hill, N.J., only 16% of 398 small- businesses owners said they used personal credit cards to help finance their businesses. The figure was 36% in a similar survey a year earlier.
Why the drop?
Small Business Administration officials and business advisers said it may reflect a new willingness among bankers to lend to small businesses. They said bank lenders from large and small banks have opened the commercial loan spigot to small businesses in recent years, recognizing the potential for growth in serving the sector.
But the downward trend in credit card use may also show that small-business owners don't need such financing as much as in the decade's early and less profitable years. A healthy economy may be giving businesspeople enough earnings to support their own growth.
But though banks are courting them more aggressively, some entrepreneurs still prefer using their credit cards to visiting the bank.
"If you're starting a business with a computer, fax, and a couple of telephones, it's much easier to go to CompUSA and get it today," said Bruce D. …