invoice factoring
When you finally get that business credit card, it opens a lot of doors and creates opportunity for you and your business. One opportunity for a business with no credit is to establish business credit. However many business owners make mistakes that impact the business to the point of no recovery. What happens is the credit limit is so high on these cards that some business owners go on a spending spree and through the business in debt within a few months. Here are common mistakes businesses make.
They don’t have a spending plan for the business credit card.
You need to know how what you are going to buy with the business credit card. Remember, the reason for getting a business credit card is to establish business credit. Plus you can use it to increase your company’s purchasing power. Also, keep in mind that business credit cards come with an extremely high limit.
It’s amazing what happens after some business owners get the credit card and see that limit. The feeling of euphoria sets in. Then all of a sudden they feel they have a pile of money to spend. However, nothing can be further from the truth. All it is a limit of how much money you can borrow and you have to be meticulous on how you plan to use the card.
In all honesty, you want to start out simple, start with a few expenses you can charge on the card and then pay the balance when the bill comes. The best expenses to start with are reoccurring expenses from vendors that offer auto pay. It’s a great way to pay your bills on time. This leads me to my next mistake I would like to discuss.
They don’t pay their bills on time.
Not paying your credit card bill on time is one of the worst actions you can take if you are trying to establish credit for your business. For one, credit card company’s like to slap you with late fees if you’re only a few days late! If you are really late it can put a blemish on your credit report that lasts for many years. You are basically giving yourself permission to let things slide. When you own your own business you cannot let things slide or you’ll be sliding right back to being an employee. When you’re a business owner, you need to stay on top of a lot of things in order to be successful. Most importantly stay on top of your bills.
Owning a business credit card to establish business credit is a great responsibility to any business owner. Unfortunately, many business owners who get a credit card for the first time make the common mistakes discussed above. However, with proper planning and making prompt payments will help you establish the credit that you need to apply for bigger loans to expand your business.
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