Small businesses turn to personal credit cards

Small business owners are increasingly in need of additional capital, with more than 60% reporting a greater need for financing compared to 12 months ago.But it turns out their reliance on business credit cards isn’t enough, with more than half turning to credit cards Personal credit cards are used to pay business expenses.

These are among the key findings of WalletHub's annual small business survey, which once again demonstrates the importance of credit cards to small businesses. A relatively new factor driving the need for additional funds is persistent inflation, with nearly two-thirds of respondents expressing doubts it will ease anytime soon. Inflation rose 2.7% in the 12 months through March, according to separate data from the Commerce Department's Bureau of Economic Analysis.

WalletHub's research is consistent with earlier findings that small businesses are increasingly relying on credit cards to manage cash flow. Last fall, the Intuit QuickBooks Small Business Insights report showed that the number of U.S. small businesses using credit cards increased from 51% to 68% between September 2022 and April 2023.

Small business rates are worse

As WalletHub research shows, small business owners often have less favorable credit card terms than individual consumers, exacerbating the situation, leading many to view the disparity as unfair.

These higher interest rates may explain why personal credit cards are still a viable option for business owners, but that situation may be outdated.

“Small business cardholders often get terms that are inconsistent with consumer offers,” said Brian Riley, Director of Credit Cards and Co-Head of Payments. javelin Strategy and Research. “Historically, regulators have separated consumers and small businesses into separate categories, assuming that consumers need protection and small businesses can protect themselves. This may have been appropriate in the early days of credit development, but as gig workers and With the rapid growth of small businesses, credit card issuers have lost an important market to serve.

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