By Matt
Starting a new business can be one of the most exciting and stressful tasks you will undertake in your life. You could be giving up the comfort and security of a regular paycheck on an endeavor that poses risk, challenge and years of hard work. On the flip side, you get the opportunity to be your own boss, to put your ideas into action and claim all the credit when you succeed.
Often, new business owners can underestimate the amount of red tape, expense and headaches involved in setting up a new company. You might start to appreciate what your old boss was going through when he was in one of his moods. At times, it seems like every hurdle cleared leads to the next unexpected obstacle. Credit is a common stumbling block for small businesses. Cash flow is sluggish but expenses remain constant. Access to a credit card could help ease the transition to profitability, but you have no track record and low revenue; most banks wouldn’t touch you with a ten foot pole. Does your business really need a credit card? How can you get a credit card for a new business?
How credit can benefit your business
In a new business that is just starting to get its feet on the ground it can be hard to keep up with all the expenses. Modern equipment, rent, advertising to get the word out, not to mention employee salaries; the bills seem endless. You probably aren’t paying yourself a salary and the money you saved up is almost gone. A business credit card can help ease some of the financial burdens and build your business:
- Individual bills can be paid with the credit card. In a form of debt consolidation, use your credit card to pay bills as they come due. You want to keep your suppliers happy. Organize your finances so that you pay your monthly card balance when it is convenient for your business.
- Keep track of costs and keep an eye on spending with a credit card.
- It gets the ball rolling on your company’s credit history. Building a positive credit score for your business can be a huge factor down the road when you are looking to finance an expansion, or invest in new equipment.
Will my new business be approved for credit?
That depends on how new your business is and your monthly revenues. Most credit card issuers require a business to have a good track record for several years and annual revenues in the millions to be considered a candidate for a corporate card. But that doesn’t mean your hands are completely tied.
Your new venture will qualify for a small business credit card if you, as the owner, are willing to co-sign for personal liability. This means that if the business can’t pay the bills, the credit issuer can come after you personally. It also means your credit score will be verified and used to determine how much credit the business will get and how expensive it will be. Once your business is more established it can apply for its own credit card, and you can remove your personal liability.
Remember when starting a new business to expect the unexpected. Always over-estimate expenditures and you will find yourself swimming more often than sinking.
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