For many small businesses, one of the quickest and easiest ways to get financing is to use a credit card. That card often tends to be a business owner's personal account.

Despite banks' efforts to sell specialized business cards to small organizations, one in five small businesses uses a personal credit card to obtain financing, according to research by Payment Systems Inc.

The Tampa research company's 1995 survey of 980 companies with $500,000 to $10 million of annual sales showed 12% use credit cards in the company name for financing, and one-third use a company card for travel and entertainment.

Average business spending on all cards is $29,000 a year, said Maria Erickson, director of Payment System's corporate services program.

Stories abound of entrepreneurs who took their own credit cards to the limit to get businesses off the ground, and market research confirms the trend.

Rebel A. Cole, a Federal Reserve Board economist who co-authored a major study last year with John D. Wolken on small-business financing, said that many large banks steer businesses looking for less than $10,000 to consumer loan departments. In many cases, business owners resort to using cards with lines of credit between $5,000 and $10,000.

Credit card questions were added to the "nontraditional credit category" in a survey conducted for the Fed in 1994 and 1995, Mr. Cole said. It found 39% of small businesses - defined as those with less than 500 employees - use a personal credit card and 28% use a corporate card.

The Fed did not ask about small businesses' use of credit cards in its previous survey, in 1987. But with credit cards becoming so prevalent, Mr. Cole said Fed economists want to seek information on outstanding balances and credit lines in their next survey.

"A lot of small businesses are using credit cards because they have to, or they're being steered to by banks," Mr. Cole said.

"We noticed a trend last year," said Janet Halloway, director of the Kentucky Small Business Development Center in Lexington. "A lot of business people were using their credit lines and credit cards to establish their businesses. People will do it for expansions as well."

One reason credit cards have become viable loan options, she said, is consolidation. An acquiring bank that gobbles up a smaller one may not be familiar with local business owners and make less credit available, she added.

Ms. Erickson said Payment Systems has learned anecdotally that women business owners have trouble getting financing, but they don't tend to use cards more than men. Instead they turn to home equity loans.

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