Traditionally it is understood that financing the business with the help of a credit card is not a safe option. However, times have changed, and now credit cards have become a practical part of launching a start-up business. These days credit cards are the third most crucial source of cash for small and medium enterprises. Hence, credit cards are the most distinguished option available in comparison to bank loans and business revenues.
How to use credit cards in the right way to finance your business?
As mentioned earlier, credit cards are a credible source to get hold of immediate cash. Take a look at the following points in details
- Understanding credit card financing benefits: before you apply for a credit card, ensure that you have a reasonable understanding of credit cards’ suitability. First, get access to revolving credits and then pay off short-term business expenses. In this way, you may cover the cash flow gaps. Also, flexibility is a benefit for entrepreneurs who handle sporadic revenues. In addition to this, you have to understand business credit, used by lenders to evaluate your firm’s worthiness. You will have to separate the personal and professional finances so that the personal credit does not affect the business credit score.
- Try to appreciate the risks involved in using credit cards for business purposes: The additional cash flow helps push the business towards success. However, misuse of credit cards may gravely damage the credit scores. Also, it affects the long-term survival of small and medium corporations.
- Select the right card: since you want a business credit card, you will have to separate the professional and personal finances. These cards come with special business-oriented programs and higher spending limits. You will also have to consider the annual fees of credit cards and their interest rate. These rewards may outweigh the yearly costs. Thus, take time to catch hold of the card which matches your requirements.
- Track your expenses: it is your responsibility to convey to each member of the institute about the use of credit cards, timing, and other related areas. You have to track your expenses if you want to have control over the credit card debts. Although entrepreneurs are personally liable for their Fingerhut credit card, they also make use of commercial liabilities, sometimes. For this, they have to sign a personal guarantee bond.
- Regularity: use available capital at regular intervals as recommended. It will help you to keep track of the expenses. Also, it reduces the risk of card account shut down. Try to keep your expenditures within 30% of the credit limit. A crucial factor in credit score is credit utilization. It will ensure the optimum use of the available credit limit.
Along with these, you will have to use the card regularly and take advantage of introductory rates for better results. Abstain from late payments and never tick your creditors. All this will help you to maintain a great credit score.