Quick credit tight for small businesses

NEW YORK, June 19 (UPI) -- The number of small U.S. businesses relying on credit cards to cover operational costs has risen, the National Small Business Association said.

With bank loans harder to get, at the end of 2008 about 44 percent of small businesses were relying on credit cards, The New York Times reported Friday.

But, by April, 59 percent of small businesses were paying day-to-day expenses with the use of credit cards, although credit limits are tightening, the Times said.

Unfortunately, some say, the credit card reform bill President Barack Obama signed into law last month overlooked a critical sector of the economy that relies on quick credit: small businesses.

"The way that the economy is going to come out of a recession is not by big business hiring but by small business hiring," said Sen. Mary Landrieu, D-La., who is endorsing an expansion of the credit card reform law to include small businesses.

Bankers, however, point to rising defaults as justification for tighter credit.

The Nilson Report said the small business delinquency rate is 12 percent, almost two percentage points higher than consumer defaults.

Credit card companies are "looking very closely at the ability of small business to pay them back," said Kenneth Clayton, managing director card policy at the American Bankers Association.