Earlier this year I posted a series on credit card reform and suggested that it would be a rough road ahead for many small business owners… unfortunately I was right.

Though the credit card reform act of 2009 may have put a spotlight on some of the obscure and outright abusive business practices embraced by the credit card industry, most of the attention has been duly heaped upon the consumer. But the truth is that small business owners are getting the worst of the credit reform fallout, and unlike consumers, they are being hit on all sides.

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In October, the National Small Business Association presented the results of a survey it conducted to determine the usage of credit cards among small businesses as a quick source of financing. It also provided a telling snapshot of the way credit card companies are treating their small business clients.

According to the NSBA survey, in April of this year 59% of small businesses have used credit cards to finance their operations in the past 12 months; this is up from 49% in December 2008. Underscoring the struggle of most small businesses to get adequate financing in an economy that has gone belly-up, this increase in credit card usage is occurring even as more small businesses report that credit card terms have gone from bad to worse. In fact, according to the NSBA survey in the last six months alone, 75% of the small businesses reported that their credit card terms had worsened.

One of the most difficult changes to swallow has been a flurry of credit limit reductions. In the past year, 41% of the small businesses surveyed stated that their credit limit was reduced- often without any overt reason. Not only do these credit limit reductions effectively reduce the amount of available financing, but they can also negatively effect a business’ credit score by creating a higher outstanding debt-to-credit ratio. Since the business is then considered to be more risky, it prohibits financing from other sources.

Other reported changes in credit card terms include: an increase in the interest rate (63%), switching from a fixed to variable interest rate (23%), and increasing the minimum amount due each billing cycle.

All of this comes at a time when fewer small businesses are paying off their credit cards each month. This year 40% reported paying their monthly credit card balances in full, down from 50% a year ago. And this is exposing countless small businesses to the same unscrupulous business practices that have gained so much attention over the last few months. Of those who carry a balance: 33% reported receiving statement after due date, 48% reported that the due date seems to randomly change, and 57% reported receiving statements too close to the due date to have it mailed on time.

What’s more, since some companies advertising business credit cards are in fact (according to the fine print) offering little more than a fancy personal credit card, such practices can be devastating to the business owner’s personal credit rating.

But the credit card industry does not stop there when it comes to small businesses… According to the survey, 57% of small businesses accept credit card payments from their customers. Each time a customer swipes a card to pay for goods and/or services, the merchant pays a small processing fee to the banks and and credit card networks. These so- called merchant interchange fees have tripled in cost since 2000 cutting into profit margins at a time when every cent counts.

Bottom line for small business owners: when it comes to the credit card industry, the cards are stacked against them.

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