The impact of the coronavirus pandemic is intensifying a challenge that many of the more than 30 million small businesses have been facing already: obtaining credit. According to the 2019 Report on Employer Firms by the Federal Reserve Bank, nearly one-third of small businesses rely on credit to help with cash flow and lack the necessary funds to meet unexpected expenses.

Numerous small business merchants address this challenge by taking out short-term business loans or using personal credit cards to bridge the gap. While credit cards with a revolving line of credit are a good funding source for merchants, a majority of small business owners do not meet the rigid underwriting policies of most, if not all, major banks. The global pandemic has put additional pressure on banks as requests for business credit increase, making the underwriting process even more inflexible.

While using personal credit cards to make everyday business expenditures may solve short-term cash flow problems, these cards can take a toll on a business owner’s personal credit score, which may inhibit their ability to finance personal needs, such as refinancing a home or purchasing a car.

An opportunity for ISOs, acquirers

 Historically, banks decline the vast majority of small business credit card applications because it is very difficult for the banks to assess the risk of newly opened businesses, sole proprietors or business owners with low credit scores. Merchants’ daily card processing receivables are rarely taken into account by banks when assessing risk. The missed opportunity for these banks is a new opportunity for ISOs and acquirers………

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