Small businesses are driving credit card debt higher
FAT Brands CEO Andy Wiederhorn joined ‘The Big Money Show’ to discuss his company’s newest acquisition, ‘Smokey Bones,’ as consumers and small businesses continue to fight inflation.
Small businesses are increasingly turning to credit cards as a key source of funding as they continue to grapple with still-high inflation and rising borrowing costs.
A new Small Business Index published by Intuit shows that, unlike large firms, a «significant number» of small businesses have relied on credit cards over the past 12 months. In the U.S., 30% of small businesses have used credit cards as the primary or secondary source of funding. Another 22% relied on a loan or line of credit to cover their expenses.
Credit card usage among small business owners spiked in 2021 – when inflation began to rise – and has been steadily increasing since then. In total, monthly credit card spending by small businesses is 20% higher on average than it was before the COVID-19 pandemic. That amounts to about $3,000 per business.
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«Inflation and interest rates are creating unique challenges for small businesses,» the study said. «Small businesses are feeling the strain and increasingly relying on credit cards.»
Visa credit cards are arranged on a desk. (Justin Sullivan/Getty Images / Getty Images)
The Federal Reserve has raised interest rates sharply over the past year, approving 11 rate increases in the hopes of crushing inflation and cooling the economy. In the span of just 16 months, interest rates surged from near zero to 5.25% to 5.5%, the fastest pace of tightening since the 1980s.
Hiking interest rates tends to create higher rates on consumer and business
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