To a small business, either a start-up or established, business credit cards can be very valuable financial tools if managed properly. Remember also, that because they’re business credit cards, they are unsecured. Which means there is no collateral tied to them. Great benefit!! But if used improperly, it can have a devastating affect on your businesses’ credit profile, and hence, your business itself.
Managing your business credit cards doesn’t require an MBA from Harvard, or a financial specialist looking over your shoulder every time you plunk it down. But it does require careful monitoring, and plain old common sense. Here are a few tips you can use to get the most from your business credit cards:
Always apply at your primary bank first. Why? Because you’ve already established a banking relationship which can pave the way for an easy application process. In short-they know you. Once you get the business credit cards, and pay them in a timely manner, it will increase your credit worthiness in the eyes of the bank. This will be of significant help when you apply for additional business lines of credit later on.
Never co-mingle your business credit cards with your personal credit cards. However, here’s a little secret to the game. If you have business debt on your personal credit cards, transfer balance the debt to your business credit card and this will immediately improve your personal credit score by lowering your debt to income ratio. This is a huge benefit of being a business owner.
Once your business credit is established, you’ll be deluged by special offers from credit card companies on a daily basis. When you’re invited to apply and the offer is good, then apply. Remember this: Just because you have applied and received a business credit card, doesn’t mean you have to use it immediately. It’s always a good idea to have extra ‘Rainy Day’ money available. Every business goes through ups and downs and having the money available can be invaluable during one of those down times. It’s always easier to get money when you don’t need it.
By all means, use the grace period when paying your business credit cards. Most providers of business credit cards offer a 21-day grace period before payment is due. This can be a big help in improving your cash flow, and it’s built-in for you to use. Don’t abuse it, and don’t pay later than the grace period deadline, however.
Like many business transactions today, you can pay your business credit card bill online. This may not sound like such a big deal, but when you think of the time and effort it takes to write out and mail a check, it’s really a good deal. Especially since the mail can sometimes be unpredictable. Knowing you can choose the exact date your bill is paid, is priceless.
Do not pay your credit card bills late! Yes, take advantage of the grace period, but paying late, especially if it develops into a habit, will end up costing a lot more than the actual bill. Late fees will bring about higher interest rates. But more importantly, late payments will go straight to your business’ credit profile-and you don’t want it there, especially if you plan on trying to get a line of credit from your bank or lender in the near future. Pay the bills on time, if possible.
Finally, always remember that your business credit card can be a very effective tool in managing your company’s finances. But like any tool, if handled improperly, it can cause irreparable harm-in this case, to your company’s business financial profile. Use it wisely!
