Using Business Credit Cards to Finance Small Business

When the economy struggles and default rates increase, lending standards can get mighty tough, especially for unsecured micro-loans. Banks may continue to court small business during these times, but borrowing will be an uphill climb. There may be one source of financing, however, that will remain plentiful and accessible even in tough times: the business credit card.

Not too long ago, under these circumstances, small business entrepreneurs did bank on business credit cards for their financing needs, according the Small Business Administration’s annual micro-loan study, which tracks trends in loans of less than $100,000. Even during times when traditional commercial lending essentially remain flat, small business loans can grow by as much as 10 percent. This may be an indication of the success of banks’ small business campaigns, offering as a come-on a plethora of small business credit card packages or perhaps even the better methods employed by credit scoring agencies.

Today, a business owner with good standing in personal credit cards will have no problem gaining approval for business credit cards. Even in those cases where the applicant’s credit history is less than sterling, business credit cards are still easier to obtain than ordinary commercial loans. When commercial loans are simply not available – and those occasions do arise – the remaining fallback may be business credit cards. The business credit card is essentially a guaranteed line of credit, and when banks withdraw their unsecured loan offerings, the small business owner may have no recourse other than securing business credit cards.

Is financing with business credit cards prudent?

It can be the ideal solution during crunch time. Business credit cards give you a 21- to 30-day float on your money. You get a guaranteed loan – albeit at high interest rates. The float you get from a business credit card does come in very handy when payments from clients become overdue, or when your business requires unexpected supplies.

This does not mean that business owners don’t get into trouble with financing via business credit cards. More than a few of them have. You should not forget that while the average business owner does not generally carry large balances on the business credit cards from one month to the next, the temptation to do so is very real and it is there all the time. Most entrepreneurs are very responsible people and are prudent in handling their finances – but when their backs are up against a wall, most of them will do whatever they legally can in order to save their businesses. Racking up the balance on their business credit cards can become one such alluring option.

Barring extreme circumstances, intelligent and discriminate use of business credit cards may actually help save the business money. If you consider the savings programs carried in many business credit cards, it is possible for business credit card users to earn discounts on a lot of services – couriers, car rentals, office supplies, printing, and many others. When you work for yourself, you’re always looking to save the pennies. Business credit cards can help you do just that.

A Beginner’s Guide to Credit Cards

A lot of people do not know that there are several types of credit cards being offered on the market today. They are standard, premium, store and secured credit cards. Before you start signing on for a new card, it is best to learn all the features, terms and fees that come with each card.

Credit Line: is the maximum amount of credit you can use on your personal credit card. All charges will include purchases, cash advances, balance transfers, finance charges and various fees. Once you exceed the imposed limit, you are required to pay a specified amount of fee.

Balance: this is the total amount of all purchases, finance charges and fees that are charged on your account. If you have high amount of balance, your available credit will decrease unless you gave a no-limit or a charge card. Note that high outstanding balance may increase your credit utilization and can lower down your credit score.

Annual Percentage Rate: This interest rate will apply once the balance exceeds beyond the grace period. Different cards vary in APR rates for various types of balances such as balance transfers, purchases, cash advance, etc. APR can increase on certain situation such as when you use cash advance, once you are late in making payments or when your card applies the universal default clause in its agreement.

Grace Period: is the length of time cardholders are given in order to pay their balance in full before the finance charges start accumulating. If you have balance from the previous month, you will not a grace period for any new purchases you make. In order to determine the length of the grace period, you can simply call customer service and ask or you can check the terms and condition to find out.

Finance Charges: This is the amount of money all cardholders need to pay once they carry balances. The cost of the finance charge is determined by using the balance and the APR. All card companies have different ways of calculating finance charges. Some use adjusted, average or the previous month’s balance, other use two billing cycles.

Rewards: One growing trend in the credit card industry are rewards card that provide incentives, bonuses or discounts each time the card is used. These rewards come in a variety of forms such as cash backs, vouchers, or through earning points.

Various Credit Card Fees: include annual, over the limit, late, finance charge, etc.

Advantages Of Having Credit Cards

Credit cards have many advantages if used judiciously. It fulfills all your needs. You can buy anything with the cards. Because of various benefits the card provides to the users, everyone from teenagers to retirees in the United States has credit cards.

Convenient to shop: Credit card is very much convenient to buy anything anywhere. If you are on a shopping spree and want to buy so many things at different shops in a market, credit card will be convenient enough for shopping. If it is on-line shopping then, credit is the best. Some online stores only accept credit cards for payments. If you are in foreign countries, you can make purchases with the credit card without having to worry about local currency.

Meet emergent needs: In case of emergency, credit cards can be an extremely helpful. If you are short of funds and need money, the credit card will provide you the required amount. If you are away from your place or on a trip to some city and you have inadvertently emptied your pocket, there the credit card will act like a friend.

Keep record of your expenditure: Your spending on the credit card will give a statement at the end of a month, stating the detail on your expenditures. You need not keep record daily to know about the spending. Credit cards can also keep you under limit in expenses as you cannot spend or borrow beyond the credit limit. It will remind you on spending.

It is secured to carry credit card: It is not secured to carry a large amount of cash. If you lose your cash, you cannot retrieve that. If you lose a credit card, you can immediately inform the card company to cancel the card. You can have another card in few days. If you are traveling, whether in the town or country or outside the US, it will be convenient to carry the card instead of cash.

Benefits: Credit card providers offer various lucrative offers like cash back on purchases, rebates on products you buy on the card, additional warranty coverage for the items you purchase, travel concessions, various insurance covers, etc. Some credit card offers free air tickets, free hotel accommodations to the card users.

Balance transfer: With the credit card, you can transfer your balance from a card with high interest rate to a card where the APR is 0%. There are many card companies who offer 0% APR for the starting six to 12 months. You can take the benefits of the promotional periods. You can save hundreds of dollars by balance transfer.

Can build good credit history: You can build a good credit rating if use credit card judiciously. If you have good credit rating that will help you later in your life. You can take loan easily. Financiers will believe you if your credit rating is good.

Improve the standard of life: Credit card can improve your daily life. Your life will be easy enough if you are using the card judiciously. What you have to give is the payment at the end of the month and not every day for every purchase.

However, if you misuse your credit card you may fall under the debt trap. Credit cards should be used properly and seriously.

There are hundreds of financial organizations in the United States providing credit cards. Some of the most famous among them are American Express Co., Chase Bank, Discover Financial Services, HSBC, and Citibank of America. They offer different types of credit cards for different categories of people. If you are a business person and want credit cards which can facilitate your various business transactions, go for a business credit card. Likewise, there are student credit card, entertainment card, store card, gas card, airlines card, etc.