Credit Cards to Fund Small Businesses
May 5, 2010 by admin
Many entrepreneurs who have just ventured into a business lack financial resources. It is difficult for them to apply for a bank loan especially if their FICO score is less than 650. Creditors hesitate to grant loans to new businesses because this is risky for them, and an estimate eighty percent of new small businesses often fail in the first tewo years. And even in cases where you are able to obtain a business loan, the terms may not be as flexible as simply utilizig a revolving credit line on a business credit card.
One option for startup businesses to help them get funds for their capital is to use credit cards. At the beginning, you would not be able to get a business credit card so your only alternative is using your personal credit card. There is a risk to you in a sense that if your business does not turn out well, you would end up with loads of debt. But if really necessary and if no other means is available at the moment, then this would be a logical move.
There are just a couple of things to take note of, and these are:
1. Make a habit of paying off your outstanding balance in full. Do not wait for your debt to increase but instead, make sure you pay whatever you owe on or before the due date and not one day late.
2. Be prepared for lowered credit limits. Some credit card companies tend to lower limits when they notice you have been charging a lot on your plastic and not paying them in full. In their efforts to not get you into a situation wherein you can no longer pay the total balance, they cut down the amount of money you can charge.
If you have been diligent in paying your credit card bills, always making sure you pay as much as possible and not just the minimum amount, then your credit rating will have significantly improved. Once this happens, it would then be the appropriate time to apply for a business credit card. To determine if you are already qualified, make sure you have the following requirements:
• Business Tax ID/ SSN for sole proprietors
• Net profit information
• Gross sales information
• Registered business name and address
Having a business credit card is good because it helps you to separate personal and business expenses, especially if your business is sole proprietorship. It also serves as a “spare†just in case emergencies arise, such as when you need to pay your supplier and you do not have enough cash available. But you should be aware that interest rates for business credit card is from 3 to 18%, with fees ranging from $39 to as high as $200. You should take some time to scout for credit companies offering the lowest interest rates and fees because this could make a huge difference on how much you will be paying month after month.