Starting a new business can be a very fulfilling endeavor. It can also be stressful and fraught with numerous difficulties. Even before you start your new business, there already exists the issue of where to get capital. Capital availability is a critical component and a major concern to business owners, be they big or small. It can curtail your plans to grow your business or expand its operations. A lack of capital can even result in employee reduction or less benefits.
With that said, there are ways to reduce the chances of failing to secure or losing capital. One excellent strategy to get your business off to a good start is to use small business credit cards as a source of capital. Although the recession has caused a bit of a credit crunch for many Americans, the number of small business owners turning to credit cards as a source of financing is starting to grow again. The National Small Business Association's mid-year report for 2012 places the percentage of small businesses that use credit cards at 37%. It shows an increase from the 34% figure NSBA reported in December 2011.
Why should you get another credit card if you already have one for personal use, though? You might be tempted to use your personal credit account for your business, but this can prove to be a bad business decision. Entrepreneurs can run a higher risk of having problems with tax and money management if they don't keep their business and personal expenses separate. Keeping different secure credit cards for these two aspects of your life can make your accounting much simpler—aside from these other advantages.
Build Business Credit. It lets your business establish its own credit. Using your personal credit account for your business means that you will have to rely on your credit score for any insurance or loan applications. It can stretch your credit line to the limit, making it harder to keep or improve your score. Building a separate credit report for your business can give you a better chance to get loan approvals as your business grows.
Take Advantage of Rewards and Discounts. Speaking of loans, it can also be easier to apply for a credit card than it is to get a loan. The credit card market is a competitive one, and this can turn out to be a boon for budding entrepreneurs. Most, if not all, credit card companies offer discounts and reward programs to small business owners. These rewards can range from cashback offers on essential expenses like office supplies to free travel miles and hotel discounts, so choose a credit card that offers a reward in line with your business. If your business requires you or your employees to travel a lot, for example, then go with a card that emphasizes travel rewards.
Keep Your Records Organized. A business credit card account can also help when it's time to do your bookkeeping. The yearly transaction reports given out by credit card companies make it easy to keep track of all expenses made for your business. These reports are fully itemized and categorized, so you won't have to pore over a mountain of receipts every year. You can use these expense reports to double check your own transaction records and even cut down on extra paperwork.
These are just some of the major advantages that a secured credit card can provide for your small business. With a little research and a bit of ingenuity, you can find a card perfect for getting your business into high gear. Of course, when you do get a new credit card for your business, make sure you keep it as protected against credit card fraud as your personal credit card.