0623 Podcast: Decrease credit lines for small business

The small business owners are more difficult to use credit cards on their businesses than before because the credit card companies cut down the credit lines. Most small business owners used credit cards to pay the operation costs or purchase the inventory. I have never heard this way to make business in my country, but I think it is a good way to make business for small business after I got this information. First, Credit cards have high credit lines, so once the small business need money to pay bills or buy inventory, those money can be used. Second, credit cards are like very short-term loans, and it is more convenient to get money than apply for loans, so small business owners can borrow money without complicated applications. Finally, the credit cards have a function of “deferred payment.” Deferred payment is a payment which consumers do not pay immediately and pay later. Consumers do not pay any interest in this period, usually within 30 days or 69 days.

However, because of the bad economy and the legislation of credit cards, the credit cards started to cut down the credit lines not only on the problem card holders also the small business owners. According to the podcast, Andrew Martin said that the delinquency of small business was higher than that of general consumers, so this was why the card companies also declined the small businesses’ credit lines. In my opinion, the card companies did not wrong, because they have to control the risk under this terrible economy situation. It is time for the small business owners to find another way to increase their liquidity or hold the cash.