Many new business owners get into their endeavor with big dreams but little practicality. This is why there is a failed company on every street corner. What makes the difference in the ones that survive and the ones that never really make it off the ground?
There are many things really, and it isn’t always a lack of success. Many very successful businesses fail, depending on your definition of success. If success means plenty of demand and a lot of satisfied customers, then yes, many successful businesses go broke. Why? Often it is as simple as money management, or a lack of it. Even with hefty revenue, if it isn’t handled properly, there are going to be problems. One money management tool is credit cards for business. Small business credit cards can make you or break you. Before jumping in to the world of credit card use, carefully consider the pros and cons.
Be realistic and realize that though they can be very useful, business credit cards can also be very dangerous.
Business credit cards are debt, plain and simple. The funds must be repaid, with interest.
They can act as a shield that blinds you from serious money issues until they are too big to do anything about. You may not realize the problem because you can just handle it in the short-term with the credit card, and then short-term becomes long-term, and a snowball effect takes over.
They can affect your credit score negatively, even if you pay on time. Part of your credit score is related to the ratio of credit you have available versus the amount of that available credit you are using.
While there are definite drawbacks to using credit cards for business, they can also be very useful if handled properly. They can offer:
- Instant cash access for emergencies, meaning there is no need to shut down or halt production for repairs or equipment replacement for longer than absolutely necessary.
- The ability to take advantage of deep discounts in bulk when available, despite cash flow.
- Rewards that can be an extra boon in many situations.
- The ability to bridge occasional gaps in cash flow while a more permanent solution is sought.
The key to handling credit cards for business properly is to set limits on their use and pay them on time. Be careful to not use all of the funds available except in the occasional, unforeseen, emergency circumstance. Get the best interest rate, terms, and rewards possible, and take advantage of opportunities to use them to grow your business, thus increasing profits and decreasing dependence on the card.
Biz2Credit offers various financing options, including small business credit cards. We can help you find what will work best for you. Visit Biz2Credit today to get started.