For small and medium-sized businesses (SMBs), adaptability is crucial for navigating the economic landscape.

Credit cards are both a vital resource and a source of ongoing challenges for these businesses.

According to a recent report by PYMNTS Intelligence, titled “SMB Growth Monitor Report: How Firms Use and Choose Credit cards,” in partnership with i2c, there’s a significant gap between what credit cards provide and the actual requirements of many SMBs across different sectors.

The report indicates that while numerous credit card options exist, SMBs would increase their spending if these cards offered features tailored to their specific industries. For instance, construction companies seek automation, salons desire fraud protection, and retailers prioritize perks. However, most credit card programs treat all businesses the same. The issue isn’t a lack of credit availability but rather that existing financial products don’t adequately serve these businesses.

This situation reveals a “missing middle” in financial services, where standard credit card offerings fail to address the complex and changing needs of the small business sector.

The Blurring of Personal and Business Finances

One of the most striking findings of the report is the extent to which SMBs blend personal and business credit usage. Fifty-four percent of surveyed businesses admitted to using both personal and business credit cards to fund their operations, with this figure rising to 61% in larger cities. This practice is notably prevalent among newer firms and urban startups that have yet to establish solid financial foundations or long-term banking relationships.

For these SMBs, credit cards serve as temporary fixes in a financial system that isn’t fully optimized for them. While they appreciate the flexibility, this mixed credit usage points to a market inefficiency: current business credit options aren’t sufficiently appealing or comprehensive on their own.

“The ‘missing middle’ in credit for SMBs is not about access, but about appropriateness.”

A major weakness in current credit card offerings is the lack of industry-specific customization. Only 15% of SMBs mentioned “business-specific perks” as a feature that would encourage greater card usage. However, this percentage increases significantly when analyzed by industry.

Such as,construction firms require automation features to streamline frequent purchases of raw materials. Professional services need analytics tools to manage billing and client reimbursements. Retailers want seamless integration with accounting software, while consumer services, especially those with high customer interaction, prioritize fraud protection.

Despite these specific needs, most credit cards offer only general benefits such as cash back on office supplies, fuel discounts, or generic points systems. This creates a significant disconnect between the operational needs of these businesses and the support their credit cards provide.

This misalignment not only limits credit card usage but also reduces loyalty, leading to frequent changes in issuer relationships and forcing SMBs to manage multiple cards. This mirrors consumer behavior but adds unnecessary complexity, with businesses averaging three cards each.

Today’s SMBs are digitally advanced, focused on growth, and have industry-specific requirements. They need more than just credit; they need a financial partner.

One of the challenges is scale. Most banks and issuers are designed to serve either individual consumers or large corporations, leaving SMBs in an awkward middle ground. Their needs are specific, constantly evolving, and highly contextual, making them to complex for standard retail banking but too small for dedicated corporate accounts.

Consequently, SMBs often piece together their financial systems, combining personal and business cards and managing multiple issuer relationships to stay financially stable.

The real issue isn’t the availability of credit cards for SMBs, but their suitability. What’s needed are financial products that consider the operational, strategic, and psychological realities of running a small business.

Credit cards are still relevant for smbs, but the one-size-fits-all approach is not. The future belongs to those who understand and cater to this “missing middle.”