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Tips for Effective Business Credit Card Management

With more and more businesses turning to credit cards as a form of financing for their business expenses it is important that business start to learn effective business credit card management. Without proper business credit card management companies could end up in financial problems before they even start.

Here are a few tips that any business, large or small, can start to implement so that their credit card management is effective.

Apply for Credit Cards at Established Financial Institutes. Try and apply for credit cards that are with your established financial institute. This will allow you to develop a relationship with the institute and can help in terms of getting more loans or other financial needs for your business.

Do Not Credit Card Hop. Many credit cards will try to get you to transfer your balance and start a new card with a different company. However, this can have a very adverse effect on your credit score and prevent businesses from getting certain lines of credits that they should be able to. Just completely avoid credit card hopping all together.

Use the Grace Period. Credit cards all start with a 21 day grace period that protect business owners from having to pay any purchases that they make. Take advantage of this time and either make small payments or make purchases that you can hold off.

Do not Use Cash Advances. Credit cards offer businesses cash advantages. It might be tempting to take advantage of this type of financing but it can really spiral out of control. Cash advances come with a lot of fees and penalties that might not be good for the company. Just avoid them all together.

No More Late Payments. Late payments can really start to add up. Make sure as a business owner that you budget in credit card payments so that you avoid any high fees that come with the late payments.

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Advantages and Disadvantages of Closed Corporation

Another type of corporation that a business can start as is that of a closed corporation. From the outside a closed corporation is essentially a smaller version to the general corporation and therefore has a lot of the same rules and regulations as a general corporation. However, there are a few differences between a closed corporation and a general corporation.

A closed corporation is one that is owned by stockholders, however, the number of stockholders are limited to only 20 to 50 stockholders. Should any new stockholder position become available closed corporations are required by law to offer the stockholder positions to those that already hold stock in the company before they take it to the public.

The advantages of a closed corporation are the same as a general corporation. The business owner’s assets are protected under a closed corporation, capital can be raised via the small limited number of stockholders and certain expenses are allowed to be deducted on the taxes like travel, insurance and pensions.

If the advantages of a closed corporation are the same as a general corporation than the disadvantages are also the same. Closed corporations are held to the same laws and restrictions that general corporations are. They must follow the same restrictive tax laws as well as any other rules and regulations that are required for corporations. The legal restrictions might be more restrictive in a closed corporation than that of a general which can be a major disadvantage to this type of business structure.

Generally companies that wish to have a closed corporation status are those that want to keep the owners of the company between themselves. However, not everyone wants to be actively involved. Under closed corporations some people can have an active role such as management, while other play an inactive role and only serve as stockholders.

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A Look at Small Business Financing: Debt Financing

When a small business owner starts out to develop a company they will be faced with a tough decision. Should they choose a financing that is considered debt financing or equity financing. Each type of financing has its benefits and drawbacks. In this article we will take a closer look at the debt financing option of small businesses.

A debt financing option can come in a number of different types. Debt finance is any type of financing that is promised to be paid back. This can either be in the form of a line of credit on a credit card, a loan or personal loan or IOU. Most forms of debt financing will have interest associated with them and the business owner will be faced with the decision to pay it back. Debt financing is also considered part of the liability of the business and is an expense that must be accounted for.

Debt financing has a lot of benefits and drawbacks.

One of the benefits of a debit financing option is that it is extremely easy for small business owner to secure a line of credit or loan through a bank or financial institution. There is a financial institute or bank that is willing to work with small business owners out there. Another benefit of a debt financing option is that no matter how much you take out in the form of financing as a business owner you will be able to plan out the payments and figure out what is owed and needs to be paid back.

The downside to debt financing is that it must be paid back at scheduled periods of time. Unlike other lines of credit regardless of how well your company is doing you will be required to pay back the interest and parts of the principle that you borrowed. In the end, the money has to be paid back regardless of profit or loss of a company.

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A Look at Small Business Financing: Equity Financing

Starting out a small business can be tricky. It is not as if you can just snap your fingers and your business is developed. It takes a lot of planning, action and money from a number of sources. While a lot of business owners will decide to take a debt financing option such as a loan, mortgage or line of credit, some business owners will decide to finance their business through a form of financing called equity financing.

Equity financing like all financing options that are available for small business owners has its benefits and drawbacks. Here is a further look in depth for equity financing.

Equity financing is any type of money that is used to finance a small business that comes from a personal source. This is usually in the form of personal savings or personal loans that can come from friends, family or co-workers.

The benefits of equity financing is that in many ways equity does not need to be paid back in installments. In most cases the equity financing results in the person who paid into the company receiving some type of investment into the company. That investment can return the money that is put into it in through dividends and capital returns.

The drawback to equity financing can be great. As a business owner you are essentially giving away shares of your company to other people. If you are not controlling how many people are invested in your company you can quickly lose control of who is really running your business. Another drawback is that at any point someone who invests money can opt out and wish to take their returns and leave, which can leave a business without that type of personal financing. The last drawback is that should a business go under and personal loans from friends and family members were given, it might create bad feelings as those loans cannot be repaid.

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Business Financing: How to Get Credit for Businesses with Bad Personal Credit

One of the most important elements of building a business is the financing involved. Without financing a business cannot be created, licenses cannot be obtained and supplies cannot be brought. However, business financing can be tricky if you as the business owner do not have good personal credit.

Luckily, there are a few things that you can do as a business owner to get financing for a business regardless of your status with personal debt. Here is a look at some of the things that need to be done that will allow you to get business financing.

Create Your Business Separately. This should be done regardless of what type of credit you have personally. Create your business separately from yourself so that you are not using your social security number to apply for business related expenses. To separate yourself apply for a tax ID for your business which will be used instead of your social security number.

Start with the Little Things. The key to getting business financing when you have poor credit is to start out small. Open accounts at local places where you can establish a credit line for your business. Make sure that you are paying on time and not running up the limit too high and you should be okay. The small cards will open doors to larger credit cards and loans.

Work on the Personal Credit Also. Just because you have created two separate parts does not mean that your personal credit will never come into play again. If you were to apply for a larger loan the bank will need to look up your personal credit. While you are building up credit for your business work on improving your personal score so that it will be possible to apply for business loans in the future.

Filed Under: Business, Financing Tagged With: , , ,
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