Starting a business is always a tremendous undertaking. It is the
most stressful undertaking a person could ever attempt to do.
Most new business owners fail to understand that running a
business is a complex operation, which will require the business
owner/manager to pull many hat tricks to stay afloat.
As the stress of the business grows, many new small business
owners find themselves completely overwhelmed by all of the work
required to keep their new business afloat.
Much of the strain of establishing and running a business is
centered on successfully juggling the finances. When working as
the head of a corporation or as a sole proprietor, every decision
made will affect the future of the business. Having a means of
relief in place in the event that a wrong decision is made can
often mean the difference between success and failure of the
business. When a bad financial decision creates a situation where
payroll cannot be met on time, a business can quickly find itself
without staff to continue operations.
Business Credit Cards For New Businesses
In many cases, start-up companies seek out a loan at the
beginning of their business. For business owners who are not
comfortable taking out a large loan, there are other options that
can be considered as an alternative.
A credit card designed specifically for business is an option
many companies will choose to pursue. This is just like a
traditional credit card, but it also provides a variety of
business directed incentives.
Credit card companies generally offer low interest rates to
attract new business enterprises. While the credit history of the
owner of a small business is going to be considered in factoring
how much credit a company can receive, other factors are
considered to carry greater significance.
The business plan and financial projections of a new company are
going to be the most important categories available for banks to
examine. Lenders and credit givers are fundamentally interested
in learning about your projected financial expectations.
For companies that have been around for awhile, an in-depth look
at its financial history and business projections are going to be
the most vital pieces of information a credit card company will
want to know.
A business credit card provider is going to be most concerned
with the stability of the company. Some banks are so concerned
about the stability of a business that they will not risk the
investment of offering any type of credit to a start-up company,
even if that company has a checking account at their bank, until
the company has maintained their business checking account for at
least one year.
This is by no means meant to discourage a business owner from
pursuing business financing. Instead, it is simply an observation
of the difficulties that many business owners face when trying to
establish business credit. Each bank has their own policies on
business credit cards, and some banks will prefer to be more
cautious than other banks.
The Pitfalls and Advantages of Business Credit Cards
As with any credit card, the most common pitfall of owning a
credit card is the potential to overspend. It is always best to
limit the amount of money that is charged on a credit card,
whether in personal finances or business finances. Business
start-up costs can be astronomical. There are also times when a
company needs a few extra dollars to keep their utilities from
being disconnected. If someone is not careful, they can easily
charge their way into a deep pit of debt that could ultimately
destroy their business.
The truth is that cash flow is always a problem for new
businesses. Small business credit cards can make it possible for
a business owner to pay all of their bills on time. The danger,
of using credit cards to maintain a business' cash flow, is when
the owner is in a state of denial about the true health of his or
her company. Unfortunately, some business owners become dependant
on their line of credit and use it to prop up a business cycle
that cannot sustain itself, ultimately leading to financial
disaster.
On the other hand, acquiring a business credit card could also be
one of the best decisions an owner could make towards the
long-term stability of his or her business. When a business owner
has access to additional funds to float his or her business
during a short window of cash flow problems, that extra money
could be just enough to keep the business alive to continue
operations. An example of such a situation could be when the
company's bank intends to hold a deposited check until after the
next payroll date. It is one thing for an owner to decide they
can wait a few more days to be paid, but it is quite another
thing altogether to ask a company's employees to wait five days
to be paid their wages.
Being able to access the financial means to keep a business
steady and on sure footing can provide a terrific sense of
security to the business owner.
The time when a credit card becomes especially handy to the
business owner is when tax time comes; a business credit card can
be a true asset. No one is better at finding accounting flaws
than our federal government, and almost every new business is
going to be audited in their first year.
If a company's transactions are all done with a business credit
card, then the company will have a permanent record of all of
their business transactions. Having documentation of all of your
expenses is vital, when dealing with the IRS.
The most important thing that a small business credit card can do
is to provide you with the means to establish a reputable credit
history with banks and lending institutions, so the business can
gain access to higher credit lines than what the typical start-up
company is afforded.
Inspiring Examples
One of the most successful cases of a small business succeeding
by the use of a business credit card can be found with Google.
Some would argue that Google is the most successful search engine
on the Internet. It has become such a phenomenon that the company
name has morphed in to a verb for all online searches.
It is amazing to think that it all began in a dorm room. Its next
home was in a garage. Eventually the founders of Google, Brin and
Page, realized they needed larger equipment. They bought all of
their new equipment on credit cards, because banks were not
interested in lending money to a small dot-com company.
Over 380 million people in over 35 different languages regularly
use Google to enhance their online experience. All of this
success was made possible by the start-up funds provided to the
Google founders by credit cards.
In Conclusion
Business credit cards can mean salvation for a fledgling company.
Having the resources to maintain your companies financial
stability can make any business owner more confident with in
their decision.
A good line of credit for your business can also lead to
countless openings for future growth. Establishing a strong and
steady financial history can be the perfect asset in finding
interested investors and development opportunities, when it is
time to reach out for a bigger line of credit.
For those small business owners who know how to utilize the
credit system to grow their business, the future may be greatly
enhanced. For those business owners who start their journey with
credit cards, the climb to greater credit availability is made
that much easier.
Braxton Heitz writes about family finances and the struggles of
the job search. If you are looking for a job or looking to make
a career move in the current troubled economy, then visit the
Jobs And Paychecks website at: http://www.jobsandpaychecks.com/.
