New Small Business Credit Card May Require Your Personal Guarantee

Your business finances will be enhanced when you know the steps to use for new small business credit card management. Your goal in adding a business credit card is not only to have a credit line for purchasing business supplies or equipment.

It also helps build a good credit rating for your small business that will reflect well on your business reputation.

1. Apply to your local bank

If your business has accounts at a local bank in your region, that is the ideal place to apply for a new small business credit card. Management at that bank will know who you are and you may receive favorable terms and a higher credit line than you might qualify for from a large credit issuer.

Chances are if you have a good relationship with your local bank, they will be more than happy to take an application for a business credit account. The local banks may also consider your personal status in the community and be less likely to require a new small business credit card to be guaranteed with your personal credit rating.

2. Compare first – and then apply

With any application for credit cards, personal or business, a flurry of new applications raises a red flag for potential lenders. It also places you in a higher risk category with the credit rating agencies. Do not apply for multiple cards at one time.

When you compare credit offers, choose the ones that seem to suit the specific needs of your business. If travel and lodging will be charged, an account that offers discounts or airline miles may be what you need. If your purchases will be for stocking or equipment, you may be interested in a credit account offering cash back.

If there is an introductory APR special, be cautious and look carefully at the interest rate that will be in effect after that short introductory period has expired. Also, compare the grace periods. This is the number of days between purchase and the time interest rates begin to accrue on that purchase. A 20 day grace period is ideal for those who will pay off business credit card charges monthly.

3. Avoid Fees and Late Payments like the Plague

Annual fees and over limit fees add up to considerable amounts on some small business credit card offers. Late payments should be avoided at all costs as they indicate to lenders and ratings bureaus a potential inability for the business to pay its debt.

The key to avoid penalty fees on a small business credit card is good management practices. Use the tools and features provided by the card issuing bank to track charges by category or by employee, set alerts that are often provided to remind you or your bookkeeper to pay the bill on time every month.

4. Never take a cash advance on a small business credit card

If you need a credit line where you can draw cash when needed, apply for a credit line at your bank. Do not use your business credit account to pull cash out. There are fees associated with cash advances and the interest charged is extremely high. When you need cash pull it from your business checking account or a line of credit and never from your small business credit card.

5. Practice good business money management

Pay your credit card bills online to same the time spent writing checks and buying postage. Establish an email account to be used only for credit card management. That is where alerts of charges made or payments due should be sent. A dedicated email account allows you or your accountant to quickly find emails from your lender with management reports for your credit account.

Small business credit card management relies on using the tools provided by your lender to track balances, create reports that break down the use of credit and identify charges made by category or item. Use those tools and managing your credit debt can be seamlessly integrated with the overall financial management of your small business.