What Business Owners Should Know Before Applying for a Business Credit Card
Starting a new business from scratch can be an exciting time in a young entrepreneur’s life, especially when one is so constantly being inundated with stories about the latest young wunderkind to strike it rich. But these stories can also have a negative impact on some young entrepreneurs.
Stories such as these can give young, naïve business owners a false sense of hope that there is no way their business idea can fail, and as a result, they can get a little reckless with their financing.
Because of this risk and the potential for financial disaster before the business is even up and running, it is important for young entrepreneurs to approach their first business credit card carefully, and a little more thoughtfully. Here are three things a young entrepreneur should take the time to know before applying for their first business credit card.
As the first-time business owner of a brand new business, your company is not going to have an established credit history. Therefore, any hope of obtaining a business credit card is going to rely on the quality of your personal credit history. If you do not know where your credit stands, then obtain copies of your credit reports from the credit reporting bureaus. Review the reports carefully for accuracy, and submit a dispute to the credit agency for any misinformation or wrong reports.
How well do you currently handle your financial responsibilities? If you pay your personal bills late every now and then, then you might want to wait until you can manage your finances better before applying for a business credit card. This is important, first, because you want to be able to manage your credit card properly from the start. But since business credit cards are not covered under the Consumer Credit Protection Act, issuers can raise your rates any time they feel like it. All it takes is for you to pay a utility bill late for them to consider you a credit risk, and then to hike your rate.
Some young entrepreneurs apply for business credit cards because they think that having a credit card with their business’s name on it is a valid sign that they are successful. But, with these cards comes the obligation to pay them, so you need to know your financial limitations before making this commitment. Look over your business’s finances to determine if you can afford to pay off a credit card every month, especially considering that the interest rate on your first card will most likely be high.
In order to protect your business’s credit and your own, it is important to ensure that you are financially ready to pursue your dreams of business ownership. Only then should you consider applying for your first business credit card.