Climate Change: Small Biz Credit Freeze Begins to Thaw


Chase (Stock Quote: JPM) is out of the gate with four new credit cards aimed specifically at small businesses, thus reversing a trend where banks were throwing nickels at smaller companies like manhole covers.

Chase is hardly alone. In the past few months, Citibank (Stock Quote: C) and Bank of America (Stock Quote: BAC) have also taken the chains off their small business cards, issuing almost 80% more card offers to entrepreneurs than in 2008, according to Mintel Compermedia.

Maybe, just maybe, the fact that major card companies are restarting efforts to court new business customers is a sign that the credit market is thawing, and that banks and other card issuers are getting aggressive about lending again.

The credit thaw comes at a time when small business lending overall has stabilized. According to the U.S. Small Business Administration, weekly small business loans are up 60% over the past six months.

With card issuers and small business owners back on the dance floor, Chase certainly hasn’t shown up empty-handed. It’s new suite of business credit cards – called “Ink From Chase” – takes direct aim at American Express (Stock Quote: AXP), a long-time champion of business card holders. One of the cards, Ink Bold, is a “pay-in-full” credit card much like the Amex model. There’s no limit to how many bonus awards points small business owners can earn, and rewards points are worth 25% more when they are redeemed for air travel.

Like Amex, there are no finance charges as cardholders pay the debt off in full each month. To get Amex’s goat, no doubt, Chase is offering the card free for the first year, then $95 per year going forward.

Another big reason why card issuers are refocusing on small business? The Credit Card Reform Act only targets individual card holders, so its rules and restrictions won’t have any effect on how business card holders and credit card companies deal with one another. That scenario, however, may not last. Legislation has already been introduced in the House of Representatives that would allow the new credit card rules to cover small businesses with 50 employees or less.

In the meantime, small business owners can expect an uptick in the number of credit card offers landing in their mailbox. Only four months after Advanta closed down its credit card operation, after its uncollectible debt had reached 20% in the first quarter of 2009, having card issuers fight over small business customers is a good sign of the times.

—For a comprehensive credit report, visit the Credit Center.

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