Small Businesses Look to Credit Cards for Future Financing
Small businesses are increasingly turning to credit cards to finance future purchases, according to quarterly research from Dun & Bradstreet and Pepperdine Graziadio Business School. The Private Capital Access Index for the third quarter 2019 finds 35% of small businesses plan to use personal credit cards for future financing, up from 21% a year ago. This is the highest percentage reported in the last eight years.
In addition to personal credit cards, 54% of small business owners said they will most likely use a business credit card to fund a future purchase. This is an increase from 42% in Q3 2018, but it falls in line with data from other quarters.
The index tracks how easy or difficult it is for business owners to secure external financing. Through 2018, the financing process appeared to be getting easier. Less than half (47%) of owners said financing was difficult, and 31% said it was easy to secure. However, those figures have taken a sharp turn over the last few quarters. In Q3 2019, 59% of owners said financing was difficult, and only 24% said it was easy to get.
Only 31% of small business owners were approved for a secured bank loan this past quarter, down from 53% in the second quarter. A study from J.D. Power showed 68% of small business owners feel banks do not fully understand their needs. Moreover, only 28% said their banks offered specialized financing options for small businesses. This may be contributing to the financing frustrations of the past year.