Managing Business Credit - English Transcripts
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The first place to start is what the differences are in business cards….There are charge cards, credit cards and credit lines. And they’re different…a charge card means that you’re going to pay the balance every month…a credit card means that you’re going to be able to amortize the balance due over a series of months which will help your cash flow, but it means you pay an interest rate on it….and the third is the credit line. That’s financing that you can have available for your business to meet particular emergencies, it’s there and it’s kind of a safety net for you. All these come from a credit card company.
The second thing that you need to worry about is the costs associated with these credit cards…they’re not free. There’s typically an annual fee – but like a lot of things in the business world – the annual fee can be negotiated so don’t hesitate to do that. It can be waived, it can be reduced. If you have additional employees who need credit cards there may be additional annual fees for each one of them. It’s a real cost, so keep that in mind.
The second thing is late fees…don’t get them because they are a very, very big late penalty and they’ll often drive up your APR, which is your Annual Percentage Rate on your credit card because a lower APR is a reward for doing a good job managing your credit.
The third thing you want to watch out for is overlimit fees and they’re even sneakier than the late payment fees because they are significant and they’ll hurt your credit rating with the provider and cause you to raise your APR in the same way that a late fee will.
A couple of other things that we want to say about corporate business cards that are really important…..one of the advantages that you can get from a lot of business cards is known as various types of rewards programs….you can accumulate miles or points to allow you to get free airline tickets or free stays for travel or lodging….you can have programs that will give you free points that you can then use to sop in their store and buy various thinkgs that you may want or need for the business or they may give you cashback on purchases that you make.
Getting a business credit card is only partially about the credit-worthiness of the business. It doesn’t matter that you’re a corporation, you’re still the owner of that corporation and your personal credit in a small business is going to affect the credit decision.
So as soon as you give them the social security number – which you’ll have to do as part of the application – they’re going to pull your personal credit score and it’s the combination of your personal credit score and the business viability that will make them decide to give you a credit card and if so—what the limits on it might be – it’s not automatic.
The reality is just about any of these loans whether it’s a business loan or a credit card loan, the company has asked the owners to personally guarantee the debt just to make sure that everyone stays connected.
A small business corporation is not like a big business corporation. A big business corporation has stockholders and it really has a life of its own…a small business corporation is very much involved with the owners of the business and their lives and business finances are often co-involved.
0:21 (Credit 3)
The trouble with bankruptcies in America is that they not only hurt the individual and their families seriously….but they hurt the community as well. And the interesting difference in bankruptcies is that some businesses go bankrupt because they were just a bad idea to start with …or the business owners --- the people starting the business – were just incompetent. And so those bankruptcies were deserved. The business never should have been started. To me, though the real tragedy here in America today is the bankruptcy that comes about with the business that has a good business idea, that has enough financing that has access to market and they still fail because they couldn’t find the next piece of information when they needed it. That’s the job of the SME Toolkit and BuzGate to be there – to provide those answers for those businesses that need that critical information at that moment in time.
For more information on the topics discussed in this SME Small Business Learning segment, access the following links.
1) Business Credit Costs and Benefits
2) Business Spending Tools
3) Business Reward Programs
4) Small Business Credit Services