Credit cards aren't the cheapest source of funds, but many small businesses rely on them for day-to-day expenses and short-term financing. In the current downturn, credit card companies are cutting back on some lending limits, to the chagrin of small business owners. This was the one major concern of entrepreneurs allowed to air the grievances at the OPEN Forum, a website for small businesses to share resources. The forum is run by American Express.
"I used (my card) for my licensing costs and my internet access," said Kevin Nechodom, who owns a startup, Watchman Software, that creates database software. Nechodom said he used an American Express card to carry balances so customers could delay payment. Now, he said he can no longer do so after his credit limit was lowered: "The impact is, I would have been using that card for expenses and now I can't."
Nechodom was one of several small business owners to vent their displeasure in an online conversation titled "Apparently Being Creditworthy Isn't Enough," at the OPEN Forum.
"We believe that the Open Forum is there to facilitate a dialogue on any topic," said Rosa Alfonso, director of communications for OPEN.
Other users of the site complained that their card limits, and credit ratings, were falling even though they hadn't missed payments. Forum moderators recommended that users contact customer service—but after continued complaints, seemed frustrated themselves: "I know I sound like a broken record, and I hate that," wrote one Open moderator.
Responding to the complaints of credit limit reductions, Rosa Alfonso said that decisions on individual accounts are made on a case by case basis. But, she said, "Certainly, the economic environment factors into our line reduction decisions."
Although he wasn't happy that his limits were cut, Nechodom was impressed that the OPEN forum aired his comments, and is otherwise happy with the company: "This is the only negative thing I've had happen with American Express."
Of course, credit card borrowing was never the healthiest practice to begin with, according to some experts. That includes advisers from SCORE, a network of retired executives who give advice to small business.
"Even in good days, you had to be careful," said Martin Lehman, a counselor for SCORE, and a retired apparel company owner. "The reason you might go to a credit card borrowing process in the old days was you didn't have family, or you might have difficulty at the bank. It still was the third route to take, but it was possible and livable."
Now, Lehman said, there are even deeper downsides to putting business expenses on plastic: "What's going on with the credit cards today is you could be signed up for a credit card and have a 12 percent interest charge and in six months it's 18 percent."