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It can be hard to get a line of credit for a new business so some owners are turning to credit cards instead.
Credit cards provide a relatively easy way to get credit but that doesn't make them a good idea for every purchase. There are drawbacks to swiping your plastic everywhere you go, both for individual and business purchases.
The trick is knowing the drawbacks of using a credit card so you can figure out where it can be a benefit to your business rather than a burden.
Before considering using a card, small business owners should consider which kind of card to get: a personal one or a business credit card.
Personal credit cards have stronger consumer protection regulations. But a business credit card doesn't affect your personal credit score and allows the business to build its own credit.
A business with a good credit score is more attractive to investors or banks when you're looking for a new line of credit.
Using a separate business credit card can make it easy to track expenses which is helpful come tax time. Business credit card interest is also tax-deductible while personal credit card interest is generally not.
A bank line of credit is still a good solution since it generally offers a lower interest rate than a credit card. But it can be hard for new businesses to get approval, reports Fox Business.
That's where good credit card use can work to your advantage. Business credit card records that show on-time payments and a good debt-to-credit ratio can be a great asset for small businesses looking to get a new line of credit.
A credit card shouldn't be your only means of credit for a business. But when you're just starting out it can get you to the point where banks will give you a line of credit so your company can continue to thrive.
Meeting with a lawyer can help you understand your options and how to best protect your rights. Visit our attorney directory to find a lawyer near you who can help.