NEED A SMALL business credit card these days? Check your mailbox.
In July and August, Chase (JPM), Barclays (BCS), Citibank (C) and Bank of America (BAC) sent out more small-business credit-card offers than in previous months, according to Mintel Comperemedia, a Chicago firm that tracks direct mail. What’s more, the number of mailings received by small businesses remained flat in 2009—a distinct improvement over 2008, when the number of business card mailings tracked by Mintel dropped 82%.
JPMorgan Chase’s Chase Card Services is getting in on the action, too. On Wednesday, the company announced plans to launch four business cards developed specifically for small businesses, including a pay-in-full charge card that will compete directly with American Express’s (AXP) Gold business charge card.
Economists and analysts see the developments as a sign that credit conditions are beginning to thaw. “For months, we haven’t had much news, and, if anything, we’ve had a lot of negative news — it wasn’t long ago that Advanta (ADVNB) froze one million accounts,” says Curtis Arnold, founder of Cardratings.com, a site that tracks and rates credit cards. But “when Chase makes an announcement where they don’t just create one card, but four cards, and one of those cards is taking on AmEx in the charge card arena, from my perspective, that is a big announcement in and of itself,” he says.
At the Small Business Administration in Washington, D.C., the average weekly loan volume in 7(a) and 504 loans is up more than 60% since March. “Although lending is down well over 50% year to date, we’re now seeing it move in the right direction,” says Chad Moutray, SBA’s chief economist. “I’m not surprised that Chase, or any bank for that matter, is jumping at the chance to pick up small-business customers… It’s a good market for them to be in.”
Some small companies that got caught in the credit crunch have not only adjusted, but are actually stronger. Randy Hales is the CEO of Mity-Lite, a light-weight table and chair manufacturer in Orem, Utah. When Mity-Lite’s bank froze its credit line in February, the firm had to run off its own cash flow. Hales redirected funds away from the company’s planned expansion into research and development. Today, Hales says, his operation is leaner and more efficient. The bank line freed up again in August, but Hales says he barely uses it. “We’re more profitable than we were before the slowdown,” he says.
Still, many small businesses are struggling. And many banks, tasked with keeping more cash on hand, remain cautious about lending. Chase says it is prudent about whom it grants cards to, while AmEx’s direct marketing efforts have fallen off dramatically. According to Mintel Comperemedia, AmEx’s direct marketing accounted for less than 7% of mailings in the second quarter of 2009, down from 23% the year before. (Both Chase and AmEx say they are committed to supporting small-business owners.)
The reception small businesses receive from other issuers will likely depend on what happens with Chase’s new business cards. “Consider this an experiment in credit thaw,” says Peter S. Cohan, the president of Peter S. Cohan & Associates, a management consulting firm in Marlborough, Mass. “They are basically making a small bet. If it pays off, they’ll expand it and if it doesn’t work, they’ll take it off the table,” he says. “This is a test; happy days are not here again.”