Your Small Business Credit

Today, with ever increasing unemployment and banking failures, business credit will help your business survive until your customers can afford to spend again. Perhaps one of the greatest benefits of credit for a small business is keeping business and personal expenses separate. At tax time, you will not have to remember whether the paper towels you purchased were for your home or your office. You will know, because of the card you used, where you used that printer paper you bought. This alone, will cut your tax time in half at the end of the year.

Many credit card companies offer excellent rewards to businesses as well. Cards like American Express, Visa, and MasterCard frequently offer cash back rewards or reduced interest rates that a small business can always use. Small business credit cards offer a grace period for paying the bill as well. Some offer rewards for not using the grace period. Between purchase and payment rewards, a business credit account just makes sense. Decide what kind of reward you want as well as what kind of payment schedule before you look at credit card offers.

Unless you have been in business for a number of years, most companies are going to incorporate your personal credit history into their decision, though. You want to make sure the bank looks at your application favorably. Before you apply for a small business credit card take the time to research your personal credit first. It is important to make sure you know what areas you have to clean up or be able to explain.

Your credit report tells the bank much more than just your score. Your bank learns your payment history and account usage as well. Any bill more than thirty days past due is going to have a negative influence on your report. Each negative influence lowers your credit score. These factors help determine your interest rate and credit limit when you apply for a small business credit card.

After you get your credit report, go over it with a fine toothed comb. There should not be any information older than seven years on it. Many reporting agencies fail to remove this information. Some reports offer an income to exposure ratio. One important factor the bank looks at is how much you owe compared to how much you make. Often, you will no longer have an account with someone but the company will report the account as current on your credit history. Usually, this is a clerical error. It takes no time to contact the account issuer and ask them to rectify to situation. In many cases, you can do this with a telephone call. Another common problem to look for is the payee responsibility. Many credit card companies list all authorized users of a card on the credit report. Make sure you know which of the cards on your report show you as an authorized user vs. the account holder. As an authorized user on the account, the credit exposure should not reflect on you. Make sure you can tell the bank about these.

A third common problem lies in paying off an account after it is closed. The account issuer will reflect that the account closed with a balance due. You need to inform the bank that you paid the account. They will want to know when you paid it off and whether you settled with a collection agency.

Once you know what you are working with in terms of correctible issues, you need to look at problem areas. Do you have past due accounts? Are your past due accounts more than thirty days old? You need to bring these accounts current before you try to apply for a small business credit card. Insuring you have a good credit standing is hard work. It takes planning and strict budgeting to make it succeed but it is worth the effort. At the end of six months, you will have documentation to take to the bank when you discuss getting a small business credit card. You will also be knowledgeable about your credit history and your current financial situation. This will lend you confidence in your negotiations with the bank.

Approaching your local bank about credit rather than using another resource makes sense on two levels. First, your bank is part of your community. You probably already have accounts there. They want you to succeed and they want to be a part of your success. Local banks rely on local revenue and need a strong business community to survive. You can talk to your local banker. He lives in your area. He conducts his personal business with you and other small businesses in your town.

Even if you do not want to work with your local bank to acquire credit, it makes sense to investigate the credit issuer before you apply. Predatory lending practices make the news quite often. One of the reasons these lenders are so successful in luring people to them is the promise of easy credit. You do not want to risk your business in one of these traps. Remember, if the promise sounds too good to be true, it probably is. Before you approach one of these companies, consider borrowing from friends and family to clean up your credit and get a better deal from a bank you can trust.

Today, with so many lenders forced to close their doors or to merge with other banks it falls to the consumer to do their research. You cannot trust that a bank or lender is financially sound. Check their reports and compare their deposits against their assets. Outstanding loans are assets in banking. You want to be sure the bank or lender you approach has more deposits than outstanding loans. Additionally, check the date of their last audit. Most lenders get nervous around audit time and usually want to limit their loan activity.

Whether you opt to work with a small local bank, a large national bank, or a loan company, a strong position on your part will improve your negotiations. You will get a better card with a lower rate. A small business credit card is an asset to any business. It helps you maintain accurate books, helps you keep your business and personal funds separate, and eases the worry over emergencies.

Get your credit in order and apply for a credit card. You will be glad you did.