Personal Business Cards » Business Loans

How to Manage Business Credit Card Debt Properly

admin — Mon, 19 Oct 2009 03:46:58 +0000

Starting up a business involves expenses. For most new entrepreneurs, a loan is a must in order to get the business started. Aside from business loans, additional support may be necessary in keeping up with the production and operating costs. Small business credit cards often provide this much-needed financial assistance to business owners.

Why Get a Business Credit Card Debt

Some people may be skeptical about obtaining cards for business because they are afraid that credit cards may lead to uncontrolled spending and debt. However, business credit cards can be great tools not only in keeping a steady cash flow but also in separating your business and personal finances. With the help of business cards, monitoring your expenses is also a lot more convenient and easy. How can you get the most from your business credit card? How can you avoid credit card debt?

Obviously, proper management and control is needed to avoid the risk of card debt. For instance, some entrepreneurs may be prone to charging their personal expenses on their business credit card but such a habit can easily lead to uncontrolled debt. As a business owner, you need to make sure that your business credit card is exclusively used for official business purposes.

Submitting your credit card payments on time is also crucial if you want to stay away from trouble. It could be tempting to pay only the minimum due even if you have the cash to pay your balances in full. But carrying over your balances from month to month also means paying for the additional interest charges. Thus, to avoid unnecessary costs, make it a point to completely pay off your charges each month.

Business Credit Card Debt Consolidation

But what if you’re already stuck in card debt? What can you do about it? A business owner has two options to solve this problem. One is by acquiring a debt consolidation loan to pay off all existing balances and stop the interest rates from accumulating further. By combining his credit card debts into a single loan, the interest rate is reduced and monthly payments are significantly lowered.

Another way is by getting a balance transfer credit card with low interest or zero interest. This would enable you to pay off all the balances you transferred at a low rate or zero interest. However, take note that the 0% APR is only applicable for a limited time, so you must take advantage of this opportunity by completely paying off all the debts you’ve transferred within the zero interest period.

Any of these two card consolidation options can work but in order to be effective, a business owner needs to ensure that he/she can pay bills without a single delay or miss. It would also be wise to avoid incurring new debts while still working on your repayment. Finally, once you’re done with your repayment, you need to a lot more careful about using your business cards to avoid falling in the same debt trap again.

By: Pamela Williams

Business Credit Cards and Business Debt – A Dangerous Combination

admin — Fri, 09 Oct 2009 08:38:28 +0000

Does your business rely on credit cards for working capital? A recent study conducted by the Ewing Marion Kauffman Foundation shows that almost 60% of small businesses relied on credit cards to provide funding for operation during their first year. The study concluded that reliance on credit cards to finance the early years increased the likelihood that a business would be in the 50% of startups that failed within 4 years.

Amazingly even a debt as small as $1000 made a significant difference in a company’s ability to survive past the 5 year mark. The pattern for credit card use show an increase in debt over the first 5 years of operation. It is those companies that start to pay down that debt by the end of their 4th year or so that are the ones to succeed. The extra burden of paying off the credit debt is often too much for some young companies who might otherwise have succeeded.

The increased use of credit cards for small businesses is a result of the ease in which cards were obtained even up to 2 years ago. They are easier to get than business loans or lines of credit… Of course there are many other factors that impact a business’ ability to make in these tough economic times, but the use of credit, even in small amounts, early on seem to take their toll.

Unfortunately, the new laws that recently went into effect for personal credit cards do not impact the business credit card industry. This report reinforces the need for the same kind of reforms for the users of business credit as there are now for personal credit. As I mentioned in a previous Ezine article from June, if you use your personal cards for business and have more than a $25,000 limit with a high balance, your personal card may be viewed as a business card and exempt from the personal credit card laws.

Are you still using wither personal or business credit cards for your business? Are you able to pay them off or are you running an increasingly large balance each month? Keep yourself out of that 50% who go under by making a conscious effort to decrease you dependence on credit cards for things you can pay cash for. Work to decrease those balances and make sure you don’t lose your shirt!

By: Linda Adams

Personal Guarantee for Small Business

admin — Tue, 01 Sep 2009 17:35:46 +0000

A personal guarantee is when an individual agrees to be held responsible for assuming the debts of another person or business in the case of the borrower failing to pay back monies borrowed or defaulting on a loan or mortgage. This provides back up protection to the bank or other lending institution and gives them another avenue to pursue if the original borrower fails to live up to their obligations.

Many personal and business lenders ask for a personal guarantee when it is the initial application for a loan or mortgage or when they have some doubts about the borrowers’ ability to repay the loan. It is very common for example for a bank to request a personal guarantee from a parent or guardian when a young person borrows for their first car and it also fairly common practice when it comes to the first business loan or credit request from a small business.

These types of loans are seen as a higher risk by the banks and therefore they want some added assurance that they will get their money back if the kid smashes up the car or the small business goes under. Neither would be an extremely unusual event and the banks have learned very well how to protect their interests along with collecting their interest rates.

In the case of business loans and lines of credit, the individual owner or operator is often asked by the bank or lending institution to put up their own personal guarantee to secure the required funds. That might mean assigning a portion of their property or assets over to the bank or it may come in the form of an actual cash guarantee. It doesn’t have to come from the individual however and a personal guarantee can be provided by a family member, a friend, or another business person in the community.

While it may seem a little unfair to the borrower to be asked by the lending institution to provide a personal guarantee it actually allows both sides to get what they want. The small business operator gets the funds they need to stay in business or make necessary improvements while the bank gets assurance that it will get its money back. It is simply another way of doing business.

A personal guarantee is a sign to the lending institution that a small business owner is ready to back his or her business with their own money or that they have such standing in the community that someone else will provide that assurance and guarantee on their behalf. A personal guarantee only really comes into play if the borrower cannot pay the money they borrowed back and in that case the business must be either poorly managed or ultimately unprofitable. The best way to avoid that scenario is for the small business owner to ensure that their business is a success. Then the business owner, the guarantor, and the bank will all be happy.

By: David Gass