While it’s not impossible to run a small business or obtain small business credit without the aid of a credit card, it is a fact that utilizing a corporate credit card can come handy throughout your business credit journey, specifically in the initial years of your business. It empowers you to buy important supplies for your business, take advantage of cash back bonuses and frequent flyer miles for travel as well as postage. It is a well known fact that most small business seeks the help of business credit card to some degree in running their business while a select few, depend entirely on them. When used with caution, corporate credit card is one of the best methods to help building business credit. Taking the rate of interest of repayment into consideration, credit card money is not cheap, yet it is fast and easy to acquire. This is the reason big credit card companies do all that is in their power to attract the attention of small business owners. It is a common practice for the credit card companies to use cash back bonuses, rewards of airline miles or free trips and free download of your tax record through software like quicken, as a tool of promotion.
Risks in using Business Credit Cards
All this being said, small business credit doesn’t come without risks and obstacles. Like any other field of business, you need to face trouble. If these troubles are not taken care of at the right time, you could face an unnecessary huge loss. But if precautions are taken to know how to handle such hazards, you can make your business credit building process smooth.
Take this for example; many first time users of business loan cards are not aware of the fact that for the first few years, till your business is established, your personal and business loan report will remain united. This is because, as your business has just begun, you would not have a registered credit profile with business credit agencies like Dunn & Bradstreet. If you are experiencing a financial glitch in your business and miss or delay a payment, it will be recorded in your personal credit report.
Risk of High Debt to Income Ratio
Take another instance for a clearer understanding; if you have accumulated some amount of debt in your credit card, it will be reported to your credit profile. While this is not a bad thing in business it will increase the gap between your income and debt making the debt to income ratio higher. This is because while you repay the debt with the profit gained through your company, it will not be recorded in your credit profile. This way you will lose the ability to get instant approval for loans and other financial assistance and benefits from lenders.
If you wish to solve these problems and have a high business credit score, do not hesitate to take the advice of reputed business credit services who can lend a helping hand through their years of experience. This way without any doubt your small business credit will improve.