Owning your own business can lead to many challenges. Access to funds is one of them. This especially holds true for new businesses trying to establish business credit. One way to solve both problems is to get a business credit card. While this is a simple solution to get your business credit started, it’s not all roses and glory. You need to keep on top of your spending habits.
When using a business credit card you need to be careful about how you use it because it can lead to other problems that can impact your business. When some get that first credit card, they automatically change into a free spending big shot and start buying things they can’t afford. So make sure you use the card with care and do not make any purchases that you cannot afford to pay back. Use the credit card based on how much income your business has. For example, if you are expecting receivables that will just pay for your expenses, then make only those purchases and nothing more.
You can start establishing your business credit by simply paying for your businesses expenses with the credit card. If you have bills that offer auto pay, you’ll wonder how you lived without a business credit card. It’s such an easy way to pay bills on time. Then at the end of the month you pay for the entire balance of the expenses. It’s actually a common practice among small business owners to pay their bills in that manner because there are bookkeeping benefits involved.
When using a business credit card to establish your businesses credit, you want to make sure you make the credit card payments on time. In order to do this, you may want to save a month of expenses in your checking account. This way you don’t have to worry about paying the bill if your receivables don’t come in on time. Remember, the credit card company makes money on interest and fees. For example, if you are late on a payment as little as a few days, you can get slapped with a late fee. If you’re really in a crunch to pay the bill on time, make sure you pay the minimum payment before the bill date and then pay the balance of the card when you get paid. If you’ve already run into some problems with your credit score, websites like credit repair.com can help you get back on track.
Remember, if you want to know how to establish your business credit, a business credit card is the way to go. As long as you practice sensible spending and pay your bill on time you’ll be on your way to establishing credit to expand your business.