A family friend put up a small company a few years ago and the business has grown since then. He was interviewed by some business students for a thesis and he gave this piece of advice: use business credit cards wisely. True, there are advantages in using these cards; these are actually great tools for business. However, like a personal credit card, the efficient use of business credit cards must be considered.
The point of availing business credit cards is to help your company build credit history. It follows that you would want to create a good history of credit rating for yourself and your company. It will also help you to finance the set-up of the company when it proves to be challenging to do so. Credit card companies have made it hard for business owners to resist offers. They would offer reward programs like cash rebates, free coupons, freebies, and discounts. Zero-interest for deferred payments is also offered. It is hard to say no to offers like these, but business owners must also use cards with caution.
Overspending is a common mistake owners commit. They become uncontrollable and do not realize that they probably would not be able to pay everything back on time. Some use business credit cards to purchase items in setting up a business. Let us be realistic and say that a new company will not have profits probably until after the first year of operations. Some establishments even go longer than that. If this is the case, paying off the credit card bills will surely be a problem. Others wrongly charge personal expenses to the business plastic. By doing so, when everything has accumulated and you only afford to pay the minimum due, you become vulnerable to bad debt which leads to higher interest rates and ultimately having no control of the business anymore. It is always sensible to keep about 60% of your limit open to avoid unnecessary costs brought about by finance charges and interests.
Remember that you applied for business credit cards to build a good credit rating for the company. Keep that as your top priority. Make sure that you can pay on time. Missing on a payment will be a bad reflection on how you handle finances. Having a bad business credit history will also affect your personal rating. Proper planning is the answer to this. Lay out you purchasing plans and schedule them in such a way that you are able to pay back on time what you owe. Regularly check your account, and adjust when necessary to cover all payments. Just be wise and you will be fine.
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