Apparently, small business hasn’t been spared the fallout from the ongoing credit crunch.
Recent data from the Federal Reserve showed that credit card issuers tightened lending standards and lowered credit limits for some borrowers in the final months of 2006. Such defensive measures make sense at a time when the largest U.S. credit card issuers have announced massive provisions to protect against defaults on credit card loans.
Some small business borrowers look to be among those experiencing lowered credit limits. In a post on The Vest Pocket Consultant (hat tip: The Wall Street Journal), Rosalind Resnick shares the story of small business owner Michelle Wood, whose American Express credit line was slashed by $10,000 because her handbag company, Lil’ Diva Enterprises, was not registered with business information provider Dunn & Bradstreet.
Lil’ Diva’s head diva shared her reaction to that AmEx decision on her own blog, The Diva’s Diary. “Holy cow, that hurt! Especially since I have excellent credit and have made every payment on time,” Wood said. “Gee- thanks for believing in me, American Express.”
Wood writes: “How many small, new businesses even have a Dunn & Bradstreet rating?! I knew this was just a line of B.S. because they’re trying to avoid their own credit crisis because of non-paying customers. Boy, am I pissed to say the least. I haven’t worked up the nerve to call them yet because I’m afraid I will say something I will regret.”
She isn’t the only borrower who’s fuming. Credit cardholder stories out of the United Kingdom have included a responsible consumer who nevertheless had his credit limit slashed by more than 93 percent within three months. Domestically, consumers have complained about Bank of America rate hikes targeting good cardholders who always make on-time payments.
Have other small business owners, like Ms. Wood, also been feeling the pinch of lowered credit limits? Vent your frustrations to us at Editors@CreditCards.com or via those friendly little comments boxes at the bottom of this page. Any responses I share at a later date will be kept confidential at your request.