Using Business Cards to Finance Your Business

The first year that you are in business, you’re going to naturally spend more than you make (unless you happen to get really lucky with a profit-generating start-up idea!) This is to be expected but it’s not something that you should just take lying down. You’ll want to do all that you can to reduce the amount of debt that you accumulate in order to start turning a profit as soon as possible after launching a business. To do this, you’ll want to pay close attention to the way that you use your business credit cards to finance the business.

The first thing that you’ll want to make sure to do is to secure a low-interest rate on the credit card that you are going to be using for business. Ideally, you will want to get a zero percent interest rate for a twelve month period of time. This will give you the first year to accumulate business debt without having to pay exorbitant interest rates. Alternatively, you may apply for a long-term low-interest rate on the business credit card (such as a permanent 5.9% interest rate).

Before you commit to getting that business credit card, you should seek out information about the card’s rewards program. You want to take advantage of the fact that you’re probably going to have to put a lot of money on a credit card in the first year by getting back as much in rewards as you can. Business rewards cards may offer cash back, bonus points for business-related expenses or miles towards travel. Find a card that will let you maximize the rewards based on your needs.

The next thing that you’ll want to do is to create a financial plan for all of your business spending in the first year. Allocate a budget for each month after carefully assessing the expenditures that you believe are going to be necessary in the first year. Make sure that you stick to this budget, using your updated credit card statements to double-check and evaluate that you are within your financial plans.

Finally, you are going to want to pay down as much as possible on the business credit card debt each month. Many businesses figure that they’ll deal with the debt problem later, after they’ve started profiting. However, if you’re in a position to pay more than just the minimum payment on the card then you should do so. You want to enter that second year of business with as little debt as possible in order to maximize profits.

This type of approach to the use of business credit cards to finance a business may also be done at different times throughout the life of the business, such as when the company is expanding and needs to go into debt to ultimately make more money. Always review all of the options open to you (such as a business line of credit) before choosing to use credit cards to finance business expenses. And always think through the financial details carefully to increase the amount of profit you earn.