Banks may now feel that there is some breathing room to take advantage of an improving economic climate to broaden their portfolio offering to include SMB credit cards. Here’s a look at how banks can turn this opportunity into an attractive return on one of their core assets – credit cards.
Often in need of a quick and easy credit advance, small business owners are turning to unsecured credit more frequently than the used to. Finding that traditional loans are slowing them down, business credit cards enable small businesses to closely track their expenses, set spending limits, and determines how much they have on hand. And just like consumers, businesses enjoy the loyalty perks, cash back and racking up the airline miles!
Previously, during the recession and the years after, many small businesses were required to use personal cards for business purposes. In addition, only the largest financial institutions were offering lines of credit to businesses, which left many business owners with few options if they could not obtain a corporate line of credit. According to The Nilson Report, JPMorgan Chase, Bank of America, Capital One, Citibank and Wells Fargo were the leading issuers of small business credit cards in 2012.
According to The Federal Reserve, The market for small credit cards is a relatively new product innovation, having only been available for 20 years and experienced considerable growth since the mid-to late 1990s.
The National Federation of Independent Businesses reports that 79% of small business owners use credit cards as a source of financing. It is estimated that $6 of every $10 of small commercial and industrial loans is generated by business cards and that number is expected to grow as the demand for credit increases.
Now, banks of all sizes, can court SMEs interest in expanding their credit line and cash flow, which will result in more high-volume purchases and greater spending than the average consumer. Many banks can leverage their existing consumer infrastructure and offer small business cards to individuals who have been using their cards to cover their business costs. The self-service and lending tools that large financial organizations have previously had at their disposal are now available for any size bank or credit union. This gives all financial intuitions the ability to meet the increasing demand for credit and profit in the process.
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