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Small Business Credit Cards
Establishing a new business involves finding reliable financing for the venture. Initially, many small business owners rely on personal income and credit to obtain the goods, services, and other necessities that are needed to create a successful business.It is extremely important to establish a positive business credit history to alleviate the strain on personal finances. Furthermore, legally, certain expenditures for small businesses should not be made with personal credit cards, including cash advances for payroll purposes and the purchase of inventory for the business. Consumer credit cards are designed for personal expenses only and their terms are defined as such.
Fortunately, the financial world has made possible the availability of small business credit cards. Acquiring a business credit card is a simple process in most cases. However, having a business credit card is not the same thing as placing the name of your business on a personal credit card. Certain steps are required to secure a valid credit card for business use.
Getting Started
- Separate your personal credit from your business credit. Do not use personal accounts for business expenditures.
- Understand the meaning of the various credit card terminologies.
- Determine which expenses are strictly business expenses and which are strictly personal expenses.
Understand the Basics
- Research the different types of business credit cards that are available.
- Research the different terms for each of the credit cards that you are considering.
- Select the credit card that most suits the needs of your business.
Building Business Credit History
- Verify that the credit card company issuing the business credit card will report your business credit history to the business credit reporting agencies and not attach it to your personal credit history.
- Open a credit history file with each of the business credit reporting agencies prior to applying for a business credit card.
- Establish some business credit history. Solicit several vendors to extend a minimal amount of credit to your business. Request that the vendors report your payments to the business credit reporting agency.
- Purchase goods or services through these vendors and make prompt payment.
Steps To Follow To Ease The Acquisition And Use Of A Business Credit Card
- Apply for a business credit card from a company with which you already have a history, for example, a personal credit card account or bank loan.
- Restrict your acquisition to one business credit card, at least initially.
- Make payments online to save time and incidental costs, such as postage.
- Make prompt payments always.
- Avoid cash advances since they generally incur additional costs to the card owner.
- Take advantage of the grace period that credit cards allow before payment is due. Checks clear quickly and deplete the business owner's funds that much more quickly.
Avenues To Follow To Establish Positive Business Credit History
- Make prompt payments on any business loans.
- Restrict business expenditures from personal ones.
- Make prompt payments to any vendors providing goods or services to your business.
- Pay the balance of the card in full each month that it is possible in order to increase the credit limit on the account.
Advantages of a Business Credit Card
- Keeping track of business expenses is an easy process with a credit card summary.
- Building a positive business credit history through a business credit card eases future loan approvals.
- Preset limits on business credit cards controls and monitors employee spending.
- Rewards and special discounts with business credit cards provide additional benefits.
- Simplifies tax requirements.
- Twenty-four hour availability of spending capital.
- Easier management of vendor relationships with simplified payments.
- Possible reduction in costs.
- Time management is positive due to simplified tracking of expenditures and payments.
- Legitimacy of the business is reflected in the existence of a business line of credit.
