As we summarized in our recent report,Small Business Credit Card Outlook 2010: Dare We Call theBottom?, the small business credit card segment has beenshowing mixed signals with regard to a turn-around. On one hand,card spending is up, but on the other hand borrowing has yet torecover. The borrowing trend is notoriously tough to measuredirectly due to the lack of a clean data source. But, to allappearances, the small business segment appears to be enjoying aspending rebound while credit outstanding continues to slide-justas it has on the personal card side.
The NFIB has conducted a long series of small business outlooksurveys, many of which have detailed this soft credit demand. Othersources we reviewed in the report confirm the general directions oflimited appetite for borrowing, accompanied by rigorous creditunderwriting.
This week, NFIB released a new analysis of October 2010 surveydata, adding further color to the situation – http://www.nfib.com/press-media/press-media-item?cmsid=55892.On one hand, they note with general credit applicants, 16% weredenied credit, and just 41% of applicants received all the creditthey wanted. However, when looking specifically at credit cards,they noted that a remarkable 95% of applicants obtained a creditcard on the first attempt. They also note that credit cards remainthe most commonly used credit vehicle (45% use personal cards and58% use business cards). Importantly, NFIB notes that for 24% ofsmall businesses, cards are their only source of business credit,and that most of these firms make this selection by choice.
Given these circumstances, it is likely that when small businessconfidence finally picks up credit cards may be the first place toshow an increased appetite for borrowing. But, if small businessesparallel consumers, the current attitudes of borrowing caution maybe tough to break. And that lack of borrowing will in turn drive aslow economic recovery as businesses limit their speed ofinvestment. I concur with the NFIB outlook: when it comes toborrowing, this will be a slow recovery. Even for creditcards.
Anyone out there?