Understanding Business Credit Card Offers

When you first open your business, you may be surprised by how many companies attempt to get you to sign up for business credit cards by sending you offers. Credit card companies have sophisticated systems to locate the names of local businesses and send solicitations. As you likely know, any company that offers to lend you money has a motive to do so. Approach the offers with caution in order to make the right decisions for your business financing. 

Beware Personal Credit Lines

The first thing to look out for with these offers is the potential that the companies are using your personal credit and name to offer you a business line. This is a particular risk if your business is not incorporated. In that case, you will always be offering your personal identity as the means to source the loan. Even an incorporated business may receive offers that are actually in the name of the individual owner. Clarify this issue before proceeding with any analysis. It is not worth risking your personal credit and collateral in order to secure a credit line for your business. The wiser choice is to separate the two entities from the beginning of your operations.

Do Not Open too Many Cards

As credit card offers pour in, do not consider each one. Some business owners make the mistake of thinking they can increase their limits by taking out multiple credit lines. This will damage your business credit; having too many open credit lines is a sign of pending potential to go into very large debts. Start by weeding through the offers to find those from reputable companies. If you do not know whether a company is reputable, try searching the company online. Look for a registered domain, physical address and customer service phone numbers. Without these simple things, the company cannot service your needs.

Find Reasonable Limits

You need limits sufficient to carry you through a business cycle. However, taking limits that are too large can damage your credit or expose you to unnecessary debt. Consider how much credit you need for immediate purchases. Add to this how much you would need to survive one to three months of slow profits. This is the maximum amount you should aim for with your first card. Subsequent credit lines can be taken based on expansion needs in the future.

Search for the Right Rates

At the end of the day, the best credit card will be the one with the lowest rates and largest rewards. Shop around for the best rates but realize that some companies offer low initial rates and then raise them significantly within the first year. Ask about the policy for raising rates, how you will be notified, and if you can dispute a rate increase. Most business owners place a large number of purchases on their credit cards. This can spell not just high rates but also large credit card rewards. Look for a card that offers your business something valuable, such as airline miles, cash back or electronic purchases. You will be surprised to see how much utility you can gain out of a good rewards program.

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