Credit Cards Small Business

Wednesday, June 13, 2012 at 3:33pm by Site Administrator

Why Small Businesses are Struggling to Find Credit

Small businesses are struggling to find credit in part because major banks are not loaning to small businesses as they have done in past years. Therefore, small business owners are finding alternative ways to fund their businesses. Some choose to use personal credit cards for startup costs. Others find private funding sources, such as family members, and others simply choose to finance their companies on their own.

Small Businesses Covering Startup Costs

Some small businesses are covering startup expenses from personal savings or opening on a shoestring budget. Micro-businesses may often be started with very little initial capital. Some business owners are considering the difficulty of obtaining credit lines in this post-recession economy, and adjusting their expectations accordingly. In other words, many business owners may opt to start businesses that require little or no initial capital in lieu of opening the doors to a business that requires a substantial startup investment. Undoubtedly, the economy influences those who wish to start a new small business with regards to their options of business types.

Alternative Sources of Business Funding

One alternative source of funding for small businesses to cover startup and operating costs is the owner’s use of their own personal credit history to obtain a business credit card. Business credit cards are one way for a small business to establish a credit line for the business. However, when obtaining a business credit card, the business owner must shop around to find the best possible credit card for their business needs. Additionally, the business owner must understand that changes to the credit card industry via the Credit CARD Act of 2009 do not apply to business credit cards. Business cards may still charge an over-limit fee and make changes to interest rates without prior notification to the card holder.

In addition to bank loans, business credit cards and personal financing, there are several alternative sources for entrepreneurs who wish to start a small business. These alternative funding sources include guaranteed government loans, economic development grants, finance companies, venture capitalists, angels and government grants. Some business owners opt to take a second or third mortgage out on their own homes to fund their businesses.

  • Guaranteed Government Loans
  • Certain small businesses may qualify for guaranteed government business loans. Find out more about guaranteed business loans at the website. Businesses that exhibit the following characteristics may apply for government loans:

    • The business must provide employment for others.
    • The business must demonstrate that it improves the environmental or economic climate.
    • The business must reduce reliance on nonrenewable energy sources or promote conservation in some way.
  • Economic Development and other Government Grants
  • Most economic development grants are awarded to communities and organizations to further economic development in a disadvantaged area. However, some grants are available to entrepreneurs whose businesses will benefit the community at large. The U.S. Economic Development website at provides more information about funding sources for economic development. offers lists of government funding opportunities for which small businesses may apply.

  • Private Finance Companies
  • Several private finance companies offer loans and lines of credit to small business owners who qualify. The database at provides names and contact information for more than 4,000 funding companies that provide small business financing.

  • Venture Capitalists
  • Venture capitalists are companies and individuals who invest in other businesses for a profit. Venture capitalists generally manage a pool of investment funds for several other companies or individuals. The Small Business Association at offers information about venture capital companies that provide loans and funding for small businesses.

  • Angel Investor
  • Angel investors are usually individuals who provide funding for businesses in exchange for partial ownership in the business. Unlike venture capitalists, angel investors generally invest their own money. An angel investor may invest a small amount of funds, such as a few thousand dollars, or several million dollars, depending on the business and the investor’s interests.

In these trying economic times, many small businesses look for alternative funding options for startup and operating costs. Because major bank loans are difficult to come by, many small business owners are funding their businesses through other such sources. Businesses that provide eco-friendly fuel alternatives or will contribute to the development of depressed neighborhoods may qualify for government funding. However, private finance companies, venture capital companies and private investors also provide small business funding.

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