Making Credit Work Positively for Your Business
If you are managing your business without sufficient funding, you are at a considerable disadvantage. If a crisis hits, you will have little to no control over the outcome. While your company may continue grow despite the financial pressure, you will not make any real progress until you acquire debt capital.
This is not accomplished through a healthy expense account alone. The credit profile for your business is an asset that will provide you with loans and great lease terms while keeping resources at a distance.
You should responsibly manage credit in order to build an excellent profile. This is achieved by making on-time payments or paying at least 30 days ahead.
Building a credit score
Your company is separate from you and needs its own credit score. You can build it in the following ways:
• Have suppliers report your credit activity to the bureaus
• Check on the credit profile regularly and report errors
• Focus on improving weaknesses in the profile
• Utilize all opportunities for growth to improve the score
• Activate fraud alerts to catch problems immediately
Emergencies are not predictable, which is why having funds put aside for disasters is so critical. Most of these situations can be managed with available credit.
Using loyalty programs
Credit cards often come with reward points, and this is a good way to reduce your business expenses. If used wisely and transferred to other loyalty plans, you can allocate the points in ways that work best for your company.
If your approach is more about return on investment, the easy access to funds that credit cards provide can raise your profits very quickly. This makes them well worth the 13 to 20 percent interest. Short-term debt should be paid off each month.
When the year ends, contact your CPA to see how much spending is required to lower the tax liability immediately. You may be able to take advantage of special pricing and save 20 percent or more by paying before the end of the year. This lowers your marketing costs, and even if you still have to pay six percent interest on your loan, you will come out ahead and not have to pay as much in taxes.
Having credit cards can either benefit or hurt your business. It all depends on how you go about using them. If you want to grow your company at a sustainable pace, you need access to loans and credit. The rule to remember is having loans ready at the times you do not need them and not just when you do.