Joe Germanotta, owner of Joan Trattoria and father of Lady Gaga, talks about the economy and inflation, crime in New York City, and the state of small businesses in a wide-ranging interview on Mornings with Maria.
Small businesses are increasingly turning to credit cards as a primary source of funding as they continue to grapple with high levels of inflation and rising borrowing costs.
New research released by Bank of America shows: Small and medium-sized enterprises Businesses are responding to inflationary pressures within the economy by increasing their reliance on credit cards to fund their operations. Aggregated and anonymized data shows small business credit card balances have increased by 18% since 2019.
Bank of America analysts said: “While the increase in credit card balances may cause some concern, we note that there are several reasons to be less pessimistic.”
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Visa Inc. credit and debit cards are arranged for a photo shoot on Monday, April 22, 2019 in Washington, DC, USA. (Photographer: Andrew Haller/Bloomberg via Getty Images/Getty Images)
For example, inflation as measured by the Consumer Price Index has increased by 22% since 2019. This means his inflation-adjusted credit card balance is equal to or lower than his 2019 level. Additionally, small business credit card spending has actually declined since his 2023, suggesting that business owners are taking steps to control spending and reallocate cash flow.
“Finally, the percentage of total bank loans is credit card loan“And the net assets of non-financial unincorporated companies, most of which are small, remain at historically low levels. Therefore, in our view, the overall balance sheet situation is relatively healthy for small and medium-sized enterprises.” says the note.
Bank of America data shows the National Federation of Independent Business (NFIB), a Tennessee-based small business owner association, saw its Small Business Optimism Index plummet in March due to rising inflation concerns. The announcement came after it was reported that the country had reached its lowest level in 11 years.
Small business optimism at lowest level since 2012: NFIB
A quarter of business owners believe that inflation due to increased labor costs and inputs is the single most important issue in running their business, an increase of 2 points from the previous month.
A closed sign on the window of a small business in Queens, New York. ((Photo credit: Lindsey Nicholson/UCG/Universal Images Group via Getty Images) / Getty Images)
“Small business optimism is at its lowest level since 2012 as owners continue to operate in large numbers.” economic headwinds“Main Street is again reporting inflation as the top problem for businesses, and the labor market has eased only slightly,” said Bill Dunkelberg, chief economist at NFIB.
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Inflation has fallen significantly from its peak of 9.1%, but progress since the summer has been roughly flat. According to the latest government data, the consumer price index rose 3.5% in March, the highest level in six months.
About 28% of small business owners said they had increased prices to offset the pain of high inflation, an increase of 7 percentage points from February. Only 13% reported a lower average selling price.
