-
-
Money Tweets
-
On the Web
- Trade penalties squeeze U.S. dry cleaners
December 26 from CNN Money Small Business - Secondary Sources: Fiscal Symbolism, X-mas Economics, and Financial Reform
December 24 from WSJ Real Time Economics
- Trade penalties squeeze U.S. dry cleaners
-
Resources Around the Web
- IRA.com
- Loan.com
- The Baseline Scenario
- The Entrepreneur's Yoda
- Trusted Advisor – Trust Matters
Category Archives: Finding Funding
Avoid risks using your credit cards for your business
In the US many people use personal credit cards to finance their business transactions. Business people are eager to use credit card accounts because their higher credit limits enable the business to access more cash toward business objectives.
An owner can avoid investing their own money while setting up a business by opting to use a credit card to tap into extra funds. But they should be cautious and exercise discipline to pay back the full monthly charge amounts otherwise face an insurmountable level of debt for the young enterprise.
Here are a few other risks involved with using credit cards that you should be aware of:
Accumulated debt: When using credit cards for business transaction, the owner risks spending money they may otherwise avoid if relying solely on cash. Therefore it’s advisable to track all your expenses and be aware of which ones were spent from credit accounts. Limit them to what you believe you will be able to repay in the next 30 days. If you will dedicate subsequent income receipts to be applied toward paying off your credit charges, then you avoid accumulating long term debt.
Fraud and Theft: Identity theft and credit card fraud are two serious risks associated with credit card usage, so be careful as to who you provide your account information to. Also be aware of the charges you make and confirm that your monthly statements do not contain others Charles that you did not make. Don’t pay for charges you did not make, which you are not legally responsible, but rather report them immediately to the lender.
Never disclose your credit card PIN number to anyone – it’s designed only to be used either at an ATM, through the telephone keypad or online.
Avoid prepaid credit cards (if you qualify): Apply for a regular credit card to avoid the risk of loss from misplacing or theft of a prepaid card. You can cancel a regular account card with a maximum $50 loss, but the prepaid account balance will be irretrievably lost.
Credit History: Avoid the adverse consequences to your credit history by paying all bills, especially credit card accounts on time or even ahead of schedule. Be aware that some low-interest accounts have a zero tolerance for your payments being received even being one day past the due date. Schedule it and all bills to arrive safely ahead of time to build and protect a good credit rating.
High interest rate: Late payments, poor credit histories and using the accounts for “cash advances” rather than purchases raise the interest rate charged by lenders. Payoff these sums as quickly as possible to lower borrowing cost and work toward performing better on your credit accounts to improve your score.
Christina Jones is a contributing writer to many financial publications and has written several articles on debt relief programs and Chapter 7 and 13c bankruptcy. Her expertise is in debt finance.
Charles H. Green is Executive Director of Small Business Finance Institute that educates business owners about finance. He is the author of The SBA Loan Book, 3rd Edition (Adams Media).
0 Comments Add a Comment | Read All Comments
Did You Know Your Lender Is Also a Borrower?
Businesses seeking borrowed funds need to be cognizant of the cost of leveraged money. Understanding how lenders determine and assess borrowing costs, or interest, gives the owner a tool with which to further evaluate the feasibility of borrowing money. Read More 
Be Interested in the Interest Cost
Businesses seeking debt financing need to be cognizant of the cost of leveraging money. Understanding how lenders determine and assess borrowing costs, or interest, gives the owner a tool with which to further evaluate the feasibility of borrowing money.
Knowing how interest rates are determined is also useful for developing strategies to lower interest costs where possible and for knowing when the best rate has been negotiated for your situation. Read More
Let’s Face It, It’s A Different World
In the today’s globalized world, ease of movement has never been greater, and it is sometimes difficult for persons of different origins to communicate effectively. America has always had a multicultural social fabric, with the historic swelling ranks of immigrants growing our population since the very founding of the 13 colonies.
Today our cultural mix continues to be a blur of a faces with many different features. Distinguishing Burmese from Vietnamese, Austrian from German, or Nigerian from Ghanaian can be challenging for the average American without practiced interaction. Read More
It Comes Down To Your Character
Lenders have many criteria to consider when deciding whether to provide financing for your business operations, and all start with the traditional examination of capacity, capital, credit, collateral, and character. But, make no mistake. Regardless of the other relative strengths you may possess, it all comes down to character.
Lenders have to be assured that prospective borrowers have the ability to perform well enough to generate profits to repay their financing. They will ensure that the borrower has a vested interest in the operation with their own money, and that there is always a secondary source of repayment from which they can ultimately get out of a deal. Read More
Make Good Decisions For Yourself
Recognizing your needs, the process, the risks, and the rewards is only half the effort to getting debt financing for your business. At this point, you may be mentally prepared, but now you have to go to work to provide the application. The ‘physical’ side of the application is to document everything to establish 1) who you are, 2) what you are, 3) what you want, and 3) why they should give it to you.
Judgment day may be anti-climactic, since a large number of decisions are going to be made in the process; many by the business, many by the lender, and many through compromise. Diligence and purpose must be the focus of your efforts for every decision leading ultimately for the money to run your business. Read More
Don’t Be Stupid
Many lenders have had the unfortunate experience of negotiating loans with a borrower who was using false, exaggerated, or misleading information to obtain credit. Whether or not the ploy succeeded, the effects are often felt by legitimate borrowers, whose applications are scrutinized with even more suspicion due to the experience. While under normal circumstances there is a natural inclination toward trusting people, be prepared to confirm everything.
Unless actual loan losses have been incurred, many lenders may be hesitant to prosecute loan applicants found to have used false information to obtain their loan. But when they do, they may get assistance from the federal government, who insures depositors and regulates banks. Read More
Set Your Sights on Reality
Starting a new business is one of the riskiest, yet exciting decisions you will make in your life. While over sixty percent of the new jobs in the United States are created by small businesses annually, a significant number of them are not sustained due to failure.
There are relatively low barriers to entry for starting up many businesses: adopt a name, maybe incorporate, get a business license and away you go. Dreams and schemes are cheap, but before you get too far down the road, you need to set your sights on reality. Read More
Protect Thyself
Don’t worry about it, it’s no big deal. Those are famous last words in any business negotiations, particularly coming from a lender to a borrower (or vice versa, to be fair). A savvy borrower who understands the terms that the lender wants in a loan agreement, must be ready to make some hard choices.
Borrowers must try to imagine the worst case scenario in their business ahead and reflect on how the lender’s terms will impact the business. Sometimes there can be ways to give the lender adequate protection without the full- scale surrender that is often described in the loan agreement. Read More
Read What You Sign (Before You Sign It!)
Incredibly, thousands of loans are made each day to borrowers who don’t know anything about their deal except that payments are due and the collateral will be sold if they aren’t. There is so much more the borrower should know.
Loan agreements are full of fine print which provide for many potential situations which may befall the borrower. Naturally these terms are designed to protect lender at the borrower’s unlimited expense.
Knowing about these terms does not mean that any of them will be changed or negotiated away, but the loan terms hidden in the fine print can be quite devastating if things don’t work out right. Knowing the consequences of your actions or the risks you take can sometimes make decisions easier to decide. Read More
Join our mailing list