Why Your Small Business Needs Its Own Credit Card and Financial Identity
When trying to get a small business off the ground, many entrepreneurs sink a great deal of their personal financial assets and credit into startup expenses.
While mixing personal and business finances may be unavoidable in the very early stages of your small business, creating a clear barrier between the two as soon as possible is wise.
Taking steps to establish your business as a separate financial entity, such as obtaining business credit cards, lines of credit, and separate business bank accounts, can make securing capital easier as your business begins to grow, as well as making accounting and tax preparation easier.
As long as these business credit vehicles are used responsibly, they can be great assets to the aspiring entrepreneur.
Obtaining capital for a small business start-up can be very difficult, making it necessary for many to use personal savings and credit accounts for the initial investment it takes to get a new enterprise up and running.
However, mingling business and personal finances over the long term can be harmful to both.
While every entrepreneur is determined to make a success of his or her enterprise, there is always a certain amount of risk involved in starting a new business.
If your business should begin to falter, your personal assets can be placed at much higher risk if they are intertwined with those of your business.
If bankruptcy proceedings become necessary upon such a failure, the involvement of personal credit cards in the debt to be discharged can make matters much more complicated than they would be if all debts were exclusively in the name of the business, charged to business credit car accounts.
Some unfortunate small business owners have found themselves unable to discharge business debts accrued on them, leaving them with these bills to repay long after the business has been dissolved.
On the other hand, if you are one of the lucky entrepreneurs whose business grows quickly, using your personal credit to finance it may be its undoing.
Should your business prospects suddenly boom, personal resources might not be able to accommodate the capital needs of such expansion.
What a shame it would be to leave opportunity aside, turning away new customers due to maxed-out personal credit cards.
However, if you have them early on, your business will have its own solid credit history when the opportunity for expansion arrives, making it easier to obtain the capital you need in the form of a business loan.
Using separate ones for personal needs and business ones increases the funds available to you.
If you are charging your day-to-day business expenses on your household cards, the time may come when there is not enough of your credit limit available for those personal needs.
Business expenses may keep your card charged too close to the limit to allow its use for that long planned family vacation, or interfere with the amount you can spend on holiday shopping.
Charging those cards up to the limit with monthly business expenses can affect your personal credit rating also, increasing interest rates.
Or, perhaps your household expenses will leave little room on the card to handle business needs on short notice, leaving you unable to repair or replace needed business equipment in a pinch.
Creating an independent financial structure for your business can avoid such conflicts, ensuring the needs of both home and business can be met effectively.
Another good reason to use business credit cards for your small business, rather than personal ones, are the specialized perks many of these cards offer.
With the aggressive competition in the credit market today, there are plenty of card companies vying for your business.
Many of them are highly specialized, offering perks tailored to particular customer bases.
Chosen carefully, yours could offer perks and rewards that are quite valuable to your day-to-day operations.
Many offer travel rewards for business customers, like airline, hotel, gasoline, or rental car discounts, while others offer great discounts on office supplies and equipment, and of course there are many that offer cash back rewards on your purchases.
With the great variety of business rewards cards available today, you are sure to find one that will offer perks relevant to your business.
Keeping track of your business expenses can be much easier if they arrive all neatly accounted for in your monthly credit card statement, faster and more convenient to manage than piles of canceled checks and receipts when it comes time to balance the books at the end of the month and claim business expenses on your tax return.
While using them can make bookkeeping easier, it is important to keep spending to a reasonable level that can be paid off by the business earnings every month, avoiding unnecessary interest costs.
Also, keeping your spending consistently low, around thirty percent of your credit limit, and paying off the balance regularly is a great way to establish an excellent credit rating for your small business.
As with any type of consumer credit, business credit card accounts or lines of credit can be of great benefit if chosen and used wisely.
With a solid credit rating, your business can weather the sometimes bumpy road on the way to success, using credit to ease the way.
Starting a small business can be a struggle, with periods of brisk business, then stretches of leaner times where cash flow can become an issue.
Establishing solid credit resources to get through those rough patches can be the difference that allows your business to rise above temporary difficulties and continue on to success, when a less prepared business owner might stumble.
While mixing personal and business finances may be unavoidable in the very early stages of your small business, creating a clear barrier between the two as soon as possible is wise.
Taking steps to establish your business as a separate financial entity, such as obtaining business credit cards, lines of credit, and separate business bank accounts, can make securing capital easier as your business begins to grow, as well as making accounting and tax preparation easier.
As long as these business credit vehicles are used responsibly, they can be great assets to the aspiring entrepreneur.
Obtaining capital for a small business start-up can be very difficult, making it necessary for many to use personal savings and credit accounts for the initial investment it takes to get a new enterprise up and running.
However, mingling business and personal finances over the long term can be harmful to both.
While every entrepreneur is determined to make a success of his or her enterprise, there is always a certain amount of risk involved in starting a new business.
If your business should begin to falter, your personal assets can be placed at much higher risk if they are intertwined with those of your business.
If bankruptcy proceedings become necessary upon such a failure, the involvement of personal credit cards in the debt to be discharged can make matters much more complicated than they would be if all debts were exclusively in the name of the business, charged to business credit car accounts.
Some unfortunate small business owners have found themselves unable to discharge business debts accrued on them, leaving them with these bills to repay long after the business has been dissolved.
On the other hand, if you are one of the lucky entrepreneurs whose business grows quickly, using your personal credit to finance it may be its undoing.
Should your business prospects suddenly boom, personal resources might not be able to accommodate the capital needs of such expansion.
What a shame it would be to leave opportunity aside, turning away new customers due to maxed-out personal credit cards.
However, if you have them early on, your business will have its own solid credit history when the opportunity for expansion arrives, making it easier to obtain the capital you need in the form of a business loan.
Using separate ones for personal needs and business ones increases the funds available to you.
If you are charging your day-to-day business expenses on your household cards, the time may come when there is not enough of your credit limit available for those personal needs.
Business expenses may keep your card charged too close to the limit to allow its use for that long planned family vacation, or interfere with the amount you can spend on holiday shopping.
Charging those cards up to the limit with monthly business expenses can affect your personal credit rating also, increasing interest rates.
Or, perhaps your household expenses will leave little room on the card to handle business needs on short notice, leaving you unable to repair or replace needed business equipment in a pinch.
Creating an independent financial structure for your business can avoid such conflicts, ensuring the needs of both home and business can be met effectively.
Another good reason to use business credit cards for your small business, rather than personal ones, are the specialized perks many of these cards offer.
With the aggressive competition in the credit market today, there are plenty of card companies vying for your business.
Many of them are highly specialized, offering perks tailored to particular customer bases.
Chosen carefully, yours could offer perks and rewards that are quite valuable to your day-to-day operations.
Many offer travel rewards for business customers, like airline, hotel, gasoline, or rental car discounts, while others offer great discounts on office supplies and equipment, and of course there are many that offer cash back rewards on your purchases.
With the great variety of business rewards cards available today, you are sure to find one that will offer perks relevant to your business.
Keeping track of your business expenses can be much easier if they arrive all neatly accounted for in your monthly credit card statement, faster and more convenient to manage than piles of canceled checks and receipts when it comes time to balance the books at the end of the month and claim business expenses on your tax return.
While using them can make bookkeeping easier, it is important to keep spending to a reasonable level that can be paid off by the business earnings every month, avoiding unnecessary interest costs.
Also, keeping your spending consistently low, around thirty percent of your credit limit, and paying off the balance regularly is a great way to establish an excellent credit rating for your small business.
As with any type of consumer credit, business credit card accounts or lines of credit can be of great benefit if chosen and used wisely.
With a solid credit rating, your business can weather the sometimes bumpy road on the way to success, using credit to ease the way.
Starting a small business can be a struggle, with periods of brisk business, then stretches of leaner times where cash flow can become an issue.
Establishing solid credit resources to get through those rough patches can be the difference that allows your business to rise above temporary difficulties and continue on to success, when a less prepared business owner might stumble.
