Small businesses often rely on credit cards, Fed study finds

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More than half use plastic to fund and expand their operations

Personal Finance Writer
Data whiz and visual storyteller

 

When small businesses need money to fund or expand their operations, credit cards are an important part of their financing toolkit. 

While loans and lines of credit are far and away the No. 1 source of financing tapped by businesses with under 500 employees, credit cards are in second place, according to a survey by the Federal Reserve Banks. More than half of these small employers (51 percent) reported using credit cards for their business on a regular basis. 

The Federal Reserve Banks found that 4 in 10 businesses with 1-499 employees applied for financing within the previous 12 months. The share is down slightly from 2016, when 45 percent sought financing. 

The study also found that, of those small-business owners seeking financing, 27 percent applied for a credit card, with 63 percent opening a business card account and 30 percent opening both business and personal credit cards for use by their business. 

The Fed’s Small Business Credit Survey collects information from firms across all 50 states and the District of Columbia through the joint efforts of all 12 Federal Reserve Banks. The 2017 survey collected 8,169 responses from employer firms, with results weighted to reflect the full population of small businesses in the United States. Results of the survey were released May 22, 2018.

Small businesses often rely on credit cards for financing, Fed study finds

See related: Best small-business credit cards, Infographic: How small-business owners use their credit cards, 7 things to know about business credit cards, How to fund a small business, More infographics




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