Guides & Resources

Small Business Owners are Loading up their Personal Credit Card Debt

The inflationary environment that small business owners are encountering right now, means that their businesses are spending more for everything and this has a direct effect on credit approvals.

Matthew Elling

November 15, 2023

 Nearly half of small businesses (45%) identified rising costs as the biggest challenge facing them today. Business owner personal credit usage is compounding the ever increasing ‘credit crunch’ for small businesses.

If business owners aren't passing on these increases to their customers, they will soon see their businesses making less money. It's a notorious fact of running a small business, that when business profit margins are narrowed, owners don't pay themselves as much as they have been, or for that matter, don't increase their salaries. This means that the business owners load up their personal credit cards when they don't continue to pay themselves their accustomed amount -relative to inflation. 

Why am I mentioning this? The lending environment right now is extremely tight for small businesses and credit worthiness comes to play in this. Why is this a big problem right now? Businesses applying for commercial credit for normal working capital needs and for expansion are being denied, not necessarily for the underwriting guidelines of the business, but because the personal credit scores of the owners are suffering. This widens the credit gap for small businesses to access funds for their businesses. 

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