Some issuers have increased business credit card lines dramatically in recent periods.

Signs of Life in Business Cards: Interactive Graphic

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The business credit card sector, which was on life support near the end of the recession, appears to be strengthening.

Unused lines at significant issuers have traveled a jagged course, but overall they have increased discernibly since the second quarter of 2011. (See the following graphic. Text continues below.)

Among a group of holding companies that reported at least $250 million in unused business card lines for the first quarter, total unused business card lines grew 5% to $151 billion during the period. (The aggregate figures exclude John Deere Capital Corp., a finance subsidiary of the manufacturer Deere & Co. (DE), since data for John Deere Capital is not available prior to the fourth quarter.)

Data on small business lending by banks shows that the volume of loans with balances of no more than $100,000 and not backed by real estate — a category that likely heavily overlaps with business card loans — has been roughly steady since the third quarter of 2010. (Commercial and industrial loans with balances of $100,000 or less also include term loans and other products besides credit cards, of course.)

Sideways drift is different than vibrancy, to be sure. Threatened by accounts that were underwritten according to customers’ personal credit histories but typically carried much higher limits than consumer cards, issuers cut small-business card exposure hard and fast during the downturn. Advanta, a small-business card specialist, failed.

Credit inquiries for small business term loans and non-card lines of credit declined from the early part of the recession through late 2009, but have been climbing since, according to data from Equifax. Credit inquiries for small business cards tumbled more dramatically, dropping about 80% from January 2008 through September last year. The rate of decline slowed across the period, but a clear upturn was not evident through the third quarter. (The Equifax data is based on a sample of 20 lenders and covers businesses with less than $20 million of revenue.)

One obstacle to account growth was a slump in the number of new businesses being established, and a spike in the number of businesses going under, during the recession and its aftermath.

Another major issue, says Michael Stefanick, a senior vice president at Equifax, is a push by lenders — prodded along by regulators — to move small business borrowers from business cards into term loans and lines of credit with safer structures, including collateral. Stefanick expects that this trend will continue.

As with consumer credit cards, the business credit card sector is very concentrated. Banks with the seven largest levels of unused consumer card lines in the first quarter accounted for about 82% of total unused consumer card lines compared with about 40% of industrywide bank assets. Banks with the seven largest levels of unused business card lines (an overlapping but different group) accounted for about 85% of total unused business card lines compared with about 46% of industrywide bank assets.

Line trends have diverged at different lenders however, and banks outside of this largest tier have shown significant changes.

Unused business card lines at M&T Bank (MTB) have steadily increased since the first quarter of 2010, for instance, rising 62% to about $500 million in the first quarter this year. Between the fourth quarter of 2010 and the first quarter this year, C&I loans with balances of $100,000 or less grew 11% to about $1 billion (data for the first three quarters of 2010 is not available). M&T said growth in business card balances reflects market trends in business-to-business payments, particularly the shift to electronic channels.

At Discover (DFS), unused business card lines fell sharply in 2010 and have been about flat since, for an overall drop of 34% since the first quarter of 2010 to $1.2 billion as of the first quarter this year. Discover called its business card segment “strategic” and said it would continue to support it.

 

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Comments (1)
the title of this article makes one think of vista print, a printer of free business cards.

will increase in useage lead to greater defaults due to decreased profits caused by higher rates given this class of credit is not fixed
and has little security behind the outstandings.


allen hardester
410-997-1115
Posted by hardester | Friday, June 21 2013 at 3:43PM ET
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