The author of this post is Tisha (Kulak) Tolar, a writer for Creditorweb.com, where she writes about credit card offers, business credit cards and small home business finances. We often get too carried away with our usual work at home business activities that we neglect what is critical to remain in home business – our financials.
In these times of credit problems, overextension of credit limits, and difficulties with the overall economy, business owners have every reason to be fearful of their financials. However, fear should not mean avoidance. Instead it should mean business owners need to become savvier and more effective at making decisions in every aspect of their business.
While it is true that credit cards can quickly be the downfall of a business if not managed properly, it is even more realistic to understand that credit cards can also be a positive to a new or growing business. In essence, credit cards do not spend themselves. The decision to use a credit card is solely the business owner’s action. If used responsibly, credit cards can bring plenty of benefits to the business table.
Here are 5 specific ways that credit cards can be advantageous to a developing business if used intelligently and for business reasons only.
Credit Building
For small businesses just starting out or medium-sized businesses looking to expand, a credit card account that is kept current and paid in full can be a great boost to the credit rating of the business. This benefit may not seem to be a big deal during the beginning phase of growth but will certainly be necessary when business growth requires expansion and larger loans are needed to keep up with the business demand. Your business may need to seek the assistance from a bank or private investor in order to keep things expanding and if your business does not have a sufficient or positive credit rating, it will be difficult to secure such assistance when you need it the most.
Expense Tracking
Just like personal finances, expense tracking is essential to maintain a strong business foundation. A thorough understanding of where all of the money is coming from and going to is key to being able to make a profit. Using a business credit card is one of the easiest ways to ensure you’ve tracked correctly each month. Statements can be broken down into different categories for each purchase made, thus enabling you to see where and when you spent profits, how to better manage a business budget, and you can also see how close you come to your business plan financial projections.
Access to Working Capital
Working capital is what funds are needed to keep the business going on a day to day basis. Businesses just starting out or working on expansion are often cash poor. Invoicing and collecting accounts receivables do not always flow on a consistent basis and often times businesses find they do not have enough money to stay afloat. Instead of investing large amounts of personal money into your business fund, you can ease a bit of the burden using credit cards to keep moving forward as long as you have a solid plan to pay off the balance each month. Credit cards can easily make the cash crunch situation worse if used irresponsibly but having access to a business credit card in the event of emergencies can certainly be a help until the receivables come in.
Rewards Working for You
If you were savvy enough to find a credit card that offers a benefit program that directly complements your business needs, you will likely find that those benefit rewards do make a difference. Whether your business has been saving thousands of dollars on travel fees, or enjoying straight up, cash back rewards, a rewards program really can make a difference in your financials each month, provided you have a thorough understanding of how the program works. Doing your research prior to selecting a company credit card is essential if you expect the card to work in your favor as opposed to working against your margin of profit.
Access to Business Resources
Again, going back to the thorough understanding of your business credit card account is essential to making you credit card work smart for your business. In addition to the perks and rewards of individual card programs, many business cards also offer free access to business resources not available to just anyone. Business card companies need to remain competitive in their own right so they often provide valuable informational articles, business tips, specialized expense reporting, and other hot topics business owners can used to stay informed.
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Tisha (Kulak) Tolar is a writer for Creditorweb.com, where she writes about credit card offers, business credit cards and small business finances.
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September 16, 2008 at 7:18 am
I have a personal credit card but have never thought of getting on for my business. As far as the personal one goes, I think it is great. I never put anything on credit unless I know that the funds are in the bank to cover the debt. As I pay it off on time I have never paid any interest.
Sires last blog post..SezWho Promotes Interaction On Your Blog
September 16, 2008 at 6:54 pm
Hi Sire,
I too use my credit card for personal use only. But it’s good to know it could be put to use too for your business expansion or other financial obligations relating to your business. I guess when that happens, we could have a second card solely for business as opposed to personal expenses.
Peter
Work At Home Ideas
September 16, 2008 at 7:50 pm
As long as you make sure that you are able to pay the balance in full, I think it is a good idea, otherwise it would be cheaper to just get a loan.
Sires last blog post..SezWho Promotes Interaction On Your Blog
October 17, 2008 at 8:05 am
Hi Peter,
Interesting post. I have a credit card for my offline business which is paid off in full each month. It seems to be a very good way of building a good credit rating and getting banks on your side when you need extra cash.
Alan Thomas
Simple Work From Home Opportunitys last blog post..Home Based Business Scams To Avoid
October 17, 2008 at 8:51 am
Hi Alan,
I think money matters are important and should be taken seriously. If managed properly credits extended to you through your credit card can be a great help in your business too whenever you need the extra cash.
Peter
October 18, 2008 at 2:55 pm
I strongly recommend that you get a line of credit, for your business, from your bank as soon as they will give it to you. If you have to go into short term debt the rate will be much lower than using a credit card.
Many good businesses go down just because they run into liquidity problems.
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November 10, 2008 at 1:57 am
I have separate credit cards for each of my online businesses to make it easier at tax time. Yes, I do have to be very careful with my spending but I don’t use them for personnal stuff.
I don’t have spare money for my business yet so I would be borrowing money anyway. I might as well use the interest free period.
David
November 18, 2008 at 2:16 pm
yeah I have learned that business credit goes so much farther than personal. In business everything is looked at in a much different light. A bigger light. It’s a lot easier to leverage more money with your business credit than your personal too. thanks for the post Peter.
December 12, 2008 at 5:37 am
The problem with credit cards is that they are hard to get back on track once you have built up a balance.
December 14, 2008 at 4:13 am
I only can think of 5 ways credit card destory your business, frued, unsafe, overuse, high fees, too much bank problems.
December 14, 2008 at 8:56 am
@Andrei Istrate: Hi Andrei, sorry to hear that but a lot of people have found it a blessing too. Thanks for visiting.
-Peter
Work At Home Ideas and Opportunities
February 17, 2009 at 12:16 pm
if i am apply to a new credit card, iam worried that i can paid that bill so i am not apply a new credit card.
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April 17, 2009 at 3:16 am
I am not a big fan of credit cards, they can be a great asset for quick cash… but very dangerous, because most of the time the control is under the company and not us.
May 3, 2009 at 1:27 am
Hi
You would have to be very disciplined to make the most of a credit card for your business. If you start carrying a significant balance from month to month I think it would be a drag on your business success.
Neil
May 10, 2009 at 8:19 am
I have just recently got 2 business credit cards to use instead of my personal cards, and the credit limits are a lot bigger. Which has helped in my advertising.
June 1, 2009 at 8:13 pm
i never thought about this one, maybe im just afraid of paying the bills on my credit card. Much thanks on this one.
June 26, 2009 at 4:40 am
But it's good to know it could be put to use too for your business expansion or other financial obligations relating to your business.
July 1, 2009 at 11:55 pm
Credit card should only be used if you have the means to pay back the money or else it could be a death sentence.
July 2, 2009 at 12:50 am
Its the time to moving fast there is no space for slower and credit card is one of the best facility to move the money very fast. It is the time of globalization.
July 5, 2009 at 7:06 am
Credit cards are really useful for business transactions especially when we use it judiciously as you have underscored.Need to be a bit meticulous in handling it.
July 8, 2009 at 9:16 pm
yeah but think of it if no one will buy your products? how are you going to pay your credit card bills?
July 10, 2009 at 6:23 pm
You are right, credit cards can help so much, but the only problem I have is finding the best one regarding the best interest rates.
July 20, 2009 at 3:56 am
i've never tried using my credit card, maybe i should try just once.
August 5, 2009 at 2:48 pm
credit cards are great, like small business loans that give your business a much needed boost for expansion and timely growth.
August 9, 2009 at 6:08 am
credit cards are good espeially when travelling,you dont have to carry too much cash.
August 17, 2009 at 2:14 am
I feel credit cards are user friendly to everyone. we don need to scare about money.
September 3, 2009 at 11:40 pm
Credit card is a good tool that you can use to your advantage. We obviously use to for daily life related expenses. But you can easily use it to carry loans and invest the money to even grow a business if you like.
September 7, 2009 at 3:07 am
Credit cards are extremely important to you when you were starting a business. my only word of caution would be to make sure you have a positive cash flow. This will help you from going bankrupt and interest rates going skyrocketing!
Good luck for your new venture!
September 21, 2009 at 10:05 am
Thanks Nice suggestion. carry on.
October 1, 2009 at 12:39 pm
A bigger light. It's a lot easier to leverage more money with your business credit than your personal too.
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October 6, 2009 at 4:58 am
Hi Peter..
That seems a great idea..!! I never thought of this.. but now I want to give it one try.. so as to check whether its working or not?
October 8, 2009 at 4:39 pm
I just prefer cash, hehe.
October 9, 2009 at 4:11 am
you can ease a bit of the burden using credit cards to keep moving forward as long as you have a solid plan to pay off the balance each month. Credit cards can easily make the cash crunch situation worse if used irresponsibly but having access to a business credit card in the event of emergencies can certainly be a help until the receivables come in.
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October 12, 2009 at 10:01 am
I know that the funds are in the bank to cover the debt. As I pay it off on time I have never paid any interest.
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November 27, 2009 at 11:11 am
Having active credit cards on your record is no problem. It shows that card issuers are willing to extend credit. If these cards have no balance on them, you should have no trouble getting a new card. Apply and start using it.
November 27, 2009 at 11:12 am
I personally use equifax, it is worth the annual fee to keep up on what is going on with my credit. They have a lot of information about how to improve your score.
December 7, 2009 at 8:12 am
Having active credit cards on your record is no problem. It shows that card issuers are willing to extend credit. If these cards have no balance on them, you should have no trouble getting a new card. Apply and start using it.
December 8, 2009 at 11:05 pm
I typically use credit cards to start freeing up cashflow so that I can put that money into marketing. Marketing is the blood of any business so I always try and put as much money as I can on the credit card and just pay it later.
January 15, 2010 at 6:50 am
use credit card with carefully, don't use it more than the amount that we can't afford to pay off. for example if we use it for $300 than pay off at the end of the billing date otherwise they going to charge the interest and the interest is going to suck our pocket.
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January 25, 2010 at 2:43 pm
It shows that card issuers are willing to extend credit. If these cards have no balance on them, you should have no trouble getting a new card. Apply and start using it.
February 3, 2010 at 5:08 am
I had used pay-pal to pay for 2 services in the past. They are not good in contacting merchant on getting your money back. The seller have to do it themselves. However they are secured. You can always charged the percent fee when client use credit card.
February 22, 2010 at 7:25 pm
Sound like a good Idea… never really thought about that
March 8, 2010 at 12:20 am
Google allows you to advertise however I would take some advice before hitting the old adwords. (I could help if you want) The results of a campaign could give you the best answer overall.
April 29, 2010 at 5:16 am
Thanks for the great post! These ideas reinforce what I teach in my entrepreneurship class. I’ll send the post out to my students, and ask them to subscribe to your blog.
May 2, 2010 at 6:24 am
Business credit card is more helpful for growing your business. Just know its perfect use and it will give you benefit. Thanks for the post that is helpful for me.
May 3, 2010 at 4:25 am
Cut your credit cards to eliminate any temptation you may have to use it again. I know this may be tough or very emotional, but it represents progress and discipline. Everyone in credit card debt has to take minor steps to achieving his or her goals. It's best to not have access to your plastic so you won't get into bad habits again. When you have a plan, stick to it and everything will fall into place.
May 5, 2010 at 4:54 am
I am a student trying to establish credit. I have already tried to apply for credit cards that are supposed to be for people who have no credit, but i've been denied on both attempts.
June 3, 2010 at 10:35 am
i personally aappreciate this site very well written. keep it upp
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June 18, 2010 at 11:30 am
Credit Card payments are one of the biggest ways in paying for good online apart from doing it with Paypal or when people simply don't have the cash or funds in their online accounts. I have had a lot of customers in the past who simply couldn't pay me because I didn't had the option for them to pay me via credit card.
July 19, 2010 at 8:22 am
Money are a great deal. Use them wisely..
July 23, 2010 at 3:45 am
thanks for the info and explanation provided
July 23, 2010 at 8:45 am
thanks for the info and explanation provided
August 1, 2010 at 8:34 pm
Thanks Tisha – very enlightening !:-)
August 5, 2010 at 7:25 am
I also having a Credit Card but I do some precautions while do online transaction with this
October 15, 2010 at 2:35 pm
Credit cards can be an easy way of helping your business get cash – although you need to be careful as it can also be an easy way of getting yourself into a lot of debt that you cant afford to pay off!
March 22, 2011 at 5:02 am
I have 5 or 6 credit cards, each has at least 5,000 limit. I use 3 of them regularly and pay the entire balance each month. The others I use very rarely. My credit score is around 810 and I have never been questioned about my revolved credit (I do own a home, I don't know if that makes a difference).
March 24, 2011 at 4:57 am
On average Americans have 8 banking accounts per house hold, this can include (but is not limited to) checking, savings, money markets, mortgage, car loans, credit cards.