Business Credit Cards for the Small Business

Business Credit Cards and Your Business

Many business owners that are tied to the cash flow of their business need to think about using a business credit card to ease their monthly credit crunch. Owning a home or your own business is many peoples version of the American dream. What many don't realize is that owning your own business comes with its own set of problems and is not easy to do. A self employed business owner is never really away from his business. He or she has to handle every aspect of their business from changing the light bulbs to ordering supplies to managing the financial aspects that keep their business working.

One of the biggest problems small businesses come up against at some point in time is the fluctuation in cash flow. If a company does not have constant cash flow it is hard to pay the bills. Vendors need to be paid on time, telephone bills need to be paid monthly and if your clients don't pay timely or a project gets stretched to the next month it is extremely hard to get everything paid timely. That is why many small business owners turn to outside cash sources to help them through their cash flow crunch.

There are varied ways to get an outside cash source for small businesses but most owners look to banks or other lending institutions for loans, lines of credit or credit cards. These are all good ways for a company to get extra available credit for cash flow problems, equipment purchases, inventory, or business purchases. The business loan will usually be a longer timed credit instrument than a line of credit or credit card. The line of credit or credit card will usually be for short term purchases that a business wants to be able to pay off and then keep the credit available open for future purchases. Many small businesses will use their credit card for all their monthly expenses as it is a way to keep track of where the money is used.

Credit Worthiness and a Business Credit Card

When your small business is making the decision to get credit with a card or credit line you need to realize that how you deal with your new influx of money will affect the credit worthiness of future credit for your business. It is your credit history that any credit Card Company, bank or lender will look into to make the decision to offer your company a business card. The lender or Credit Card Company will also do a credit analysis of you or the business to look into the creditworthiness of you and your business. In this credit analysis you could possibly be asked to submit a business plan, particularly if you receive your credit card from a bank or financial institution. They will want to understand you and your business as best they can before lending you money on one of their credit cards.

One aspect that any lender will be looking at before authorizing the small business credit is the ability of the business to repay the money. Credit card companies and banks will be looking to make sure the business has the capacity to pay the monthly payment from any charges accrued or the ability to pay the entire balance if that need should arise. While with a credit card the lender doesn't ask how you intend to repay the money you've charged, they will look at your businesses operating aspects to analyze the cash flow that comes in monthly as well as the future business cash flow to analyze your ability to continue to borrow and repay.

The will look at your past and current payment history on whatever credit you are using now, both in your personal and business areas as this shows them how responsible you are in managing your credit and financial issues. Both banks and credit card companies will want to know what type of capital you as a business owner have invested in your own company. This is usually an indication that the business owner has a personal risk at hand should the business come on hard times or fail and most lenders want to see some type of personal risk before they will authorize any type credit funds. If after all this the small business owner needs a little help before the credit card lender or bank will authorize the funding, it may be possible for the business owner to put up collateral in the form of separate funds in a savings account, or a guarantee such as having a co-signer on the account to shoulder the responsibility of the credit card.

Things You Should Know Before Getting a Business Credit Card

There are a few things to know before you start the process of procuring a small business credit card. When applying for a business credit it is usually best to try to obtain the funding in the business name. This is not always easy if you do not have good credit, but it is best to try to apply through the company name first. Know that all credit history on a credit card issued to a business will be reported in the company name. This makes a good impact on your business name and the creditworthiness of your business name.

A credit card in the business name will have the credit history reported to the big three credit reporting agencies just as personal credit history is reported and will only be reflected on a personal history report if the credit card account falls delinquent. For this reason always look the monthly credit card statement over thoroughly for any inaccuracies and report immediately. Many credit card companies offer small businesses the ability to operate their card statement online. This access gives any company the ability to monitor their account 24/7. With that access comes the added benefit of being able to watch employee spending, utilize cash advances, and adjust monthly cash flow, pay vendors quickly and on time 24/7, as well as tracking and reconciling purchases and monthly statements.

Your small business will want to look for a card that comes with the lowest possible credit interest rate available. There are many online sites that are available to compare the interest rates on credit cards. Remember that your business will be offered the best rate that is available based on its credit history and assumed credit worthiness. Check also to see what introductory rates are being offered as they can be very low as well.

Rewards are also becoming popular with credit cards. Rewards are sometimes given in the form of air miles, cash back or even products back. If you have a company that will be using their card daily, the reward program can be a very nice perk. There are even some credit cards that come with the offer to watch and monitor your business credit for you and will alert you to any inappropriate activity. But anyone can monitor their own credit simply by ordering a credit report. It can be done today online or by contacting one of the reporting credit agencies. With our economy it's a perfect time for the small business owner to sign up for a credit card today and reap the benefits tomorrow.