Years ago, when I needed to finish my thesis for my degree, I had to find an interviewee that will give light to some business tricks. Fortunately, my dad’s friend has his own company that does well to this day so I did not have a hard time finding a subject. One of the lessons he learned during his start-up days was to apply and use business credit cards the sensible way. These cards are actually great tools for the business but also must be used responsibly just like personal cards.
Business credit cards help build your company’s own credit history, your company being a separate entity. A good credit rating puts your reputation in a good light for your creditors and investors. So keeping a good score will somewhat make you financially stable. Our family friend also pointed out that in the beginning, when he was just setting up his office he needed business credit cards to augment some of the purchases. Some credit card companies listed irresistible offers like cash rebates, freebies, discounts and free coupons. Some even offers zero-interest for deferred payments.
The same offers often cause overspending though and spending over the top is a common mistake committed by business owners. They do not realize that the spending has become out of control and find out later on that the business will not be able to pay back on time. For instance, new companies use business credit cards to buy office furniture and fixtures. In reality, most businesses actually do not earn profits or only breaks even after the first year, some even take longer. So paying off also becomes a problem if spending was not controlled in the first place. Others charge personal expenses to the business card which is plain wrong. When expenditure accumulates, it is likely that interest rates and penalties will increase also, jeopardizing the company’s credit rating. This defeats the use credit cards, right? Avoid vulnerability to bad debt by being sensible and keeping about 60% of your credit limit open. Surely, you would not want to be charged with penalties and interests unnecessarily.
Keep in mind that these plastics are here to aid you and help you build a good credit rating for the business and that it should be your top priority to limit spending. Swipe only when you know you can pay on time. Even just one missed payment will reflect badly on your credit history and will tell so much about how you handle your finances. It is always best to be a wise spender and keep even your personal credit rating at its best.