Chances are that if you have ever thought about starting a business, you are getting offers for credit cards for new business. You can simply register a website under a business name and the applications and pre-approvals come pouring in. While it can be tempting to snatch them up and get all you can, a little careful research could save you a lot of time, money, and heartache in the end.
So what do you need to know before you apply for credit cards for a new business, and what are the pros and cons of using them?
Using credit cards for new business is extremely easy. Generally, a business can get approved for a small credit card with a hefty interest rate fairly quickly. Then it is just a matter of buying what you need and paying the bill. One of the advantages of using business credit cards is that many of them now offer such perks as cash back and rewards points for flights, hotels, restaurants, and prizes.
Using a credit card can be a fast and easy way to secure financing for a new business venture. Further, making purchases and paying them off on time every month is a great way to establish a solid business credit history.
As with anything, if it sounds too good to be true, then it probably is. The low credit limit and high interest rate that comes with most pre-approvals make it hard to keep up. If you do not pay the bill within the month, you run the risk of having your balance grow too quickly. This can cause all kinds of credit issues that pose problems for future financing needs.
What You Need to Know
If you have the money that would allow you to fund your own business, then you may not want to get your venture off the ground by “maxing out credit cards.” It makes for a great anecdote, but many credit cards come with a 19% APR. You don’t want to charge too much if you cannot pay off immediately. Shop around for credit cards that offer high limits, lower interest, and rewards benefits.
This is not the case for many. If you are in the majority and really need a reasonable interest rate with enough money to get your business going and growing, other options are available. Biz2Credit specializes in helping entrepreneurs find just the right financing for their specific needs. With a network of over 1,300 lenders, Biz2Credit has helped tens of thousands of companies start and growth their businesses.