For the last 3 years, small businesses have been starved for capital and unable to come up with money to keep their doors open or expand their operations. But that may be about to change.
Credit is starting to come back to small businesses in very small packages. My wife used to have an LLC that’s no longer active. Suddenly, she’s getting deluged with solicitations for credit for her defunct LLC.
So after nobody wanted to give credit, suddenly it seems like everybody’s back with offers of plastic. American Express is trying to push its various OPEN products. And all the big traditional Visa and MasterCard issuers are getting back in the game too.
If you take on these business cards, know that none of them are covered by the reforms of the Credit Card Accountability, Responsibility, and Disclosure (CARD) Act of 2009. So the issuing lenders are still free to change the terms and conditions whenever they like. They can lure you in with a teaser interest rate and raise it on a whim.
Know that although credit opportunities are remerging for small businesses, it can be both a blessing and a bear trap. Be aware that you’ll have basically no rights if you accept one of these cards. You never want to get yourself in a position where you charge up a storm only to be ambushed by the issuing bank with a change in terms.
The Los Angeles Times reports that one bank had a 13% intro rate on a small business card and then bam! they raised it to 22%. Another card started in the low teens and then was jacked up to 29.99% by another issuer.
Know the risk. Know why the solicitations are back in your mailbox. And be careful out there!