You've heard the term “business credit,” but do you really know what it means? It refers to the credit lines you may have for your business, such as for furniture or equipment. While you don't need to have these lines if you are not using the business as a pass-through for your personal finances, it is still wise to understand what they mean to keep them in good standing with the major credit bureaus. In this article, we will learn the basics of business credit.
When you get started establishing your business, you generally pay your suppliers by the order they receive their goods. This can be a good way to build a business credit history, but if you aren't careful you can end up building a credit card debt instead. If you use your suppliers to pay for goods that you buy for your business, you can add business credit cards to your payment method. By paying off these credit cards on a regular basis, you can begin building a positive credit history for your business. Your payment history will demonstrate that you can manage money and that you are financially responsible.
You may be able to establish business credit cards through your bank. Often banks will provide you with a business credit line in order to help you gain the financing you need to start and grow your business. While this route can be helpful, you should be aware that you are using your bank as a bookmaker and that any interest you pay on this line of credit will be reported to the credit bureaus.
There are also many non-traditional business credit cards available. You can obtain business credit cards online, through mail and in person at a local branch. Non-traditional means such as prepaid and debit cards are less well known than traditional business credit cards. However, they can be just as helpful as a traditional card and you should consider whether or not one is right for you.
Fees for business credit cards vary. Some cards come with fees that can make paying back your balance more expensive than it would be if you did not have a business credit line. Other fees exist simply to make the card attractive to customers and draw them in. You should do some comparison shopping when you are comparing business credit cards, but try to choose one with the lowest fees and charges.
Make sure that you understand what you are getting out of your business credit cards. This means examining the annual percentage rate (APR), the grace period and late payment fees. If you are paying a high interest rate on your credit card payments, this could be an indication that your business needs to be closed. Keep this in mind when you . . . . . . compare business credit cards because it can help you make the best decision. After all, your company's success depends on your ability to responsibly manage your business finances.