Business Owners Must Be Smart If Using Credit Cards For Capital Needs

Online, April 28, 2011 (Newswire.com) - A survey done last year by the Small Business Administration found that nearly 60 percent of small business owners use credit cards to meet their businesses' capital needs.

This makes sense when you realize that loans through banks and the SBA have become increasingly difficult to obtain. Using credit cards as a limited-scale financing technique can be successful, but you should be careful that you don't find yourself in deep debt, drowning in sky-high interest rates.

Don't forget that mixing your business and personal transactions on the same card can create potential tax and money management issues. Keep your business charges on your business credit card, and you can more easily track your corporate expenditures and reduce your tax season headaches.

One benefit of a credit card is the 30-day no interest grace period. You can use that time to improve your cash flow, but remember you must pay off the balance before the grace period ends, or you'll face high-interest debt.

You should stick to the card you have and not go card hopping. Signing up for multiple credit cards to take advantage of deals can have a negative impact on your credit score, making it harder for you to get business loans and lines of credit later.

One thing you should do is check your credit score. A good score is above 620. You can get a free report from each of the three bureaus each year. Review your reports carefully, to be sure the information on file is correct. If you find an error, contact the corresponding bureau immediately to have the item removed.

Stay away from cash advances, which can incur multiple fees and costs, and don't usually qualify for the interest-free grace period. Only use your credit card when you need immediate funds.

And be sure to pay the bill on time. It shows you are a responsible business owner.