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How to use a credit card to finance your business startup

When a prospective business owner is looking to start a business he or she will have to consider many different options. However, in todays tight lending market traditional means of financing may be out of the reach of a new and inexperienced business owner. This has led many prospective business owners to turn to using credit cards as a means to finance their start up. If you are a prospective business owner and you are considering this financing option then it is important to take all of the pros and cons into account before making your decision. Here is what you need to know about how to use a credit card to finance your business startup-

- It pays to have a business credit card-Many people don't understand that if they use their personal credit card for a business startup they are responsible for the charges they incurred even if the business fails. This can leave the business owner with substantial debt and no way to repay it. Keep in mind that while it can be hard to be approved for a business credit card its not impossible. If you have exceptional personal credit you may find a lender that is willing to take a chance on your startup business.
- Keep all business purchases separate-If you cannot obtain a business credit card or you choose to use a personal credit card then it is imperative that you keep all purchases that are made for your business separate from your personal purchases. If you don't follow this rule you will have a nightmare of confusion when tax time rolls around and you even risk an audit.
- Consider the interest rate-The bottom line is that credit cards are expensive. You may find that the interest rate you would pay on a credit card is substantially higher then even taking out a personal loan. You need to have checked out all of the financing options before you settle on using your credit cards. However, despite the higher interest rate you may find that your credit card lender will be more willing to work with you on payments.
- Look for rewards-Today there are many different credit cards that offer rewards when you make purchases. These rewards can include but are not limited to: cash back, flyer miles, or even discounts on the items that you buy. These can be a great benefit for your startup business. You should also look to use a credit card that will offer a credit limit extension when you have shown yourself to be an on time payer. This can help you to have the credit you need to grow your business and make managing it much easier
- Make your payments on time-If you are only making your minimum payments and you are not always making them on time you will be hurting your credit. Whether you are using a personal or business credit card you need to be aware of what you should do to improve your credit score. Paying on time and more then the minimum payment will go a long way toward improving your credit score and making your business eligible for other types of financing.
- Read the fine print-Credit card agreements can be complicated. You need to have read the find print and know what you should expect from your credit card company. If you don't do this you may find that you are having fees and charges show up on your statement that you had no idea about. Part of managing your business finances is knowing exactly what your credit card agreement entails.

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