When small businesses are able to take on credit card debt, rather than spending liquid capital, they are more likely to help the economy, a new study found.
According to Keybridge Research, which conducted the study commissioned by the American Bankers Association, there is a correlation between small businesses having access to credit cards and both employment growth and revenues. The study found that for every 1 percent that available credit through card lenders increases, small businesses are able to hire 0.051 percent more employees and will see an increase in revenues of 0.14 percent.
Keybridge said this means that between 2003 and 2008, credit card lending to small businesses accounted for the creation of 1.6 million jobs in the U.S. – 592,000 jobs with small businesses alone and another 1 million for larger businesses. This lending also resulted in the addition of $142 billion to the American economy in those years.
However, according to the latest from the ADP National Employment Report, small businesses shed 1,000 jobs in June, possibly because lenders have tightened restrictions, leaving them unable to take on more credit card debt and spend money on other costs.