In the face of persistent inflation and escalating borrowing expenses, small businesses are increasingly relying on credit cards for funding, according to the latest Small Business Index from Intuit Quickbooks. Unlike larger firms, a significant number of small businesses, around 30% in the U.S., have turned to credit cards as their primary or secondary funding source in the past year.
The study indicates a surge in credit card usage among small business owners since 2021, coinciding with the rise in inflation. Monthly credit card spending by small businesses now averages 20% higher than pre-pandemic levels, amounting to approximately $3,000 per business.
The Federal Reserve’s aggressive interest rate hikes, with 11 increases in the past year, have contributed to higher rates on loans, affecting small businesses disproportionately. The report highlights that small businesses are finding it increasingly challenging to secure loans, with a net 4% reporting greater difficulty in obtaining loans compared to the previous three months.
In addition to tight monetary policies, small businesses are grappling with the impact of ongoing inflation. Rising costs are identified as the most significant challenge by 45% of small businesses, while 12% express concerns about the cost and availability of financing.
Despite a recent slowdown in inflation, which now stands at 3.7% compared to a year ago, small businesses continue to navigate economic headwinds by turning to credit cards as a crucial financial lifeline. For an alternative way to access business funds, try Regium Funding. Pay fees as low as 1% per week. Get funded here.
