Small Businesses Have More Credit Card Debt

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A newly released report by the Small Business Administration (SBA) finds that small businesses have acquired more outstanding debt. Most of it was credit card debt. From June 2004 to June 2005, both the number and dollar amounts of small business loans rose 25 percent.

All commercial lending institutions accounted for the numbers, not just SBA loans and the increase in business debt was especially prevalent in the smallest businesses, under $100,000. Credit cards accounted for much of the debt.

Credit is essential for buying a small business due to the capital needed to buy and maintain inventory, hire employees and have funds available for future growth, but credit cards provide the most expensive form of credit, along with having unnecessary risks. When using personal credit, enough must remain in case of emergencies, or not only personal but business stability may be jeopardized and everything would be lost should the business fail. The loan would need to be repaid and the loss could include both personal and business assets.

Most buyers will require some kind of business purchase financing and specializes in larger SBA loans of between $400,000 and $5 million and provides guidance for the buyer through the process of applying for and obtaining an SBA loan.

Too much debt on credit cards will raise the debt-to-income ratio and could put any chance of getting a loan in jeopardy. The SBA does not allow borrowed money or credit cards as the down payment on SBA loans, so the the loan must be structured so there is adequate working capital.

"Small business buyers often choose the wrong lenders for the type of business they want to buy," says owner Peter Siegel, as 70 percent of buyers who go directly to a lender for a small business loan will be turned down. "They may not understand or appreciate how important it is that the loan is structured right. They don't get enough support and direction during the loan process." Mr. Siegel is also the author of 'Business for Sale - How to Buy or Sell a Small Business'.

Even though a majority of people may be aware of the SBA, many may not be aware of the important details of obtaining SBA loan financing or that banks have personal and changing requirements and criteria for granting a loan. The company says that 90 percent of potential borrowers who use BizBuyFinancing get approved for the SBA loans and that they have long working relationships with SBA lenders that add to this success rate.

The company's Business for Sale Online Academy offers weekly workshops that provide potential Buyers with help in preparing to get quick and efficient SBA financing.

To find out more on buying a small business and see the schedule of live webinars, go to and when it is time for the webinar to start, click the "Join This Session Now" button. The company, established in 1991, states the webinars are free and open to the first 40 people who join the call.

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