Bloomberg recently revealed that small businesses have had much difficulty getting low interest credit card unlike some of the big companies in most states across the country.
Unlike big companies, small businesses do not offer bonds and stocks which is a requirement for low interest rates once they have decided to borrow money to be used as their additional capital or for expansion of their businesses. Small businesses are left borrowing in credit card companies which offer large amounts of interest rates.
Bloomberg adds that large companies offered bonds amounting to $100 billion in the first two months of the financial year. There is a 32 percent increase compared with the same period last year. With this significant increase, companies sold their bonds at the least interest rates.
Small companies did not have any access to these bonds or stocks. They did not have the same privilege like those of the big companies. Thus, they resort to banks or credit card companies which offer higher interest rates. Small businesses are feeling this kind of disadvantage with the economic situations they face.
Small businesses have a hard time looking for additional resources that will meet their expenses or additional capital for their businesses to grow. Aside from the interest rates, they are also charged with other processing fees when they apply for loans or borrow huge amounts of money in credit card companies.
The high interest rates that these small businesses are faced with extend to their customers. The expenses and interest rates that small businesses pay are being shouldered by its customers.
One factor why prices of the products and services increase in U.S. is because of the inability of small businesses to pay all of their operating expenses. Thus, some small businesses chose to cut their costs or delay the growth of their businesses just to avoid the current interest rates that most credit card companies offer.
Some small businesses are waiting for the time where the economy will recover from the recession. Once other credit card companies have recovered and are willing to lower the interest rates they offer, small businesses will more likely to grab this chance to borrow money for the benefit of their businesses.
According to the Federal Reserve, large companies which have the ability to borrow more than $100,000 at an interest rate of 8.95 percent compared to the small businesses slapped with interest rates that can soar as high as 11.3 percent.