With More Access to Credit Comes More Debt

Now that credit card companies have discovered the small business market, small business owners are taking on more debt.
The number of small business loans outstanding under $100,000 increased 25 percent between June 2004 and June 2005, according to a report released today by the Office of Advocacy of the U.S. Small Business Administration. The increase came mostly from credit card use by small business. The report also noted that the number of small business loans outstanding between $100,000 and $1 million increased 5 percent during the same period.
“Access to credit is vital for small business survival,” said Dr. Chad Moutray, Chief Economist for the Office of Advocacy. “That is why we produce our annual lending report, so that trends in small business finance are made clear. One evident trend is the increase in the number of micro business loans outstanding. Coupling that increase with the small increase in the dollar amount outstanding of those loans shows that the small business credit card market continues to be quite dynamic.”
The report also ranks lenders in each state by their small business lending activities, as well as ranking large national financial institutions. The report includes data on American Territories as well as the states. A complete ranking of lenders, including prior annual reports, is available. Lenders are ranked on their overall small business lending, not by lending under SBA programs.
However, with increased use of debt comes more risk should the economy slow down. Just because entrepreneurs have access to funding does not always mean that they should use it.