Put Your Credit Card to Work for Your Business

Small business owners tend to be financially conservative; most have learned they must be conservative to achieve success in their businesses. This conservatism sometimes can lead to an aversion to credit card debt and while that is a generally healthy attitude, it can be counterproductive. There are advantages to using a business credit card and there are ways that credit cards can enhance the bottom-line.

Advantages of Business Credit Cards

Business credit cards give the small business owner a pre-approved line of credit (the credit limit on the card), often at rates that compare favorably with a working capital loan from your friendly neighborhood bank. While I do not advocate using a business credit card to finance the day-to-day operations of your business, I do value a pre-approved line of credit for the following reasons.

1. Life is fast but business is faster. When an opportunity arises, the successful business is the business with the means to seize the opportunity. A business credit card can do that for you. Being able to respond immediately to an opportunity can give you an edge on your competitors. Nothing (other than cash on hand) prepares you for those opportunities like a business credit card.
2. More difficult to quantify, but no less real, is peace of mind. Having a degree of financial peace of mind allows you to focus on your business and your goals.
3. Wisely used, a business credit card can simplify your record keeping. Most card issuers offer the option of an itemized monthly statement online that you can conveniently download to Quicken and other popular accounting software options. Even if you maintain your own records via Excel, you can download in Excel format too. I would not recommend you embark on this course unless you are in a position to pay the balance in full each month when you receive your statement.

Using Credit Card Rewards to Enhance the Bottom-line

There is money to be made through the intelligent use of rewards, cash back and 0% introductory rate business cards. There is, however, a real danger of misusing such cards in the pursuit of the perks they offer. Additionally, you need to devote a fair amount of attention to special promos and changing offers to really benefit from the programs being offered. This is perhaps not the most productive use of time for the small business owner. However, if you or your staff can devote some time to a careful analysis, there is money available to enhance the bottom-line if you can take the necessary time to research and implement a spending program which makes the most of what these cards offer. Also, given the variety of cards available in the market place, try to choose a card or cards that suit your business needs.

Tips on Raising Your Credit Score

Unless your business is well established with a sound financial track record, chances are you card will be based on your personal net worth and credit history. If your credit score is weak, here are a few tips that can help bring your score up.

1. You can obtain your TransUnion, Experian and Equifax credit reports at no charge from www.annualcreditreport.com. This is the only legitimate online source for access to your free annual credit report.  The Fair Debt Collect Practices Act entitles you to a free copy of your credit report from each of the above named companies, once per year. The easiest way to improve your score is to order these reports, review them for errors and challenge the errors. Estimates suggest that errors on individual credit reports range as high as 70%.
2. Ideally, credit card balances should be paid-in-full each billing cycle, however, if you cannot, the balance you carry over to the next billing cycle should be kept below 30 percent of the card’s credit limit.
3. Do not cancel unused credit cards. This may be counterintuitive, but history drives credit score and also impacts other factors involved in calculating credit scores.
4. Apply for and open credit accounts only to meet a legitimate business need. Inquiries affect credit score, so it is important to minimize requests for credit. Many small business owners fail to monitor the accounts receivable. Always look to your receivables as a source for needed funds before borrowing. I recommend using this free invoice factoring tool to determine what debt relief you might obtain by turning your receivables over to a factoring firm capable of converting them to cash at a small premium, often less than you might pay in interest on a loan.