Depending on how long you've been in business and your credit history, you may have to rely on business credit cards for the time being. And while it may not be an ideal situation, they do allow you to build up your credit score while having access to money you might need to keep business going. One thing that you do want to be mindful of is getting too far into debt with these credit cards—that could be disastrous for you down the road. Below are the top three mistakes made by companies who utilize a business card.
Relying upon just a single business credit card. The more access to credit you have, the better this will impact your score. While it may sound confusing, it's really not. Let's say for instance that you have a single card with a limit of 10k. If you charge 5k on that then you are using 50% of all available credit. Whereas if you have three different cards all with 10k limits and you charge smaller amounts on each, you're using less of your available credit which in turn positively impacts your score.
Mixing personal and business. One of the biggest mistakes company owners make is to utilize their business credit card for personal expenses. This is definitely a no-no. Especially for tax purposes, you want to clearly distinguish those cards which are for business and those which are your personal credit cards.
Overcharging. This is a simple one and yet a mistake that many make. Sometimes you do get strapped, and it is very tempting to just turn to your card, but if you don't have the money to pay it back relatively quickly nor do you see this money coming in any time soon, then you are just going to hurt yourself and your company.
At First Union, our specialty is working with small businesses to help them make it through financial downtimes. Whether through short term loans, lines of credit or business credit cards, we can help get you back to that point where your business is thriving. Call today to find out more!