So you’ve heard about the benefits of developing a business line of credit, but you are unsure how to go about doing it. Although credit cards can be a great source of revenue, they are not without some potential pitfalls, so you want to know the right things to do and not to do before you go ahead and make that purchase.
Firstly, you need to check with your credit card company before you start using their card. You may be surprised to learn that your business line of credit may not be accepted by a large number of credit card companies. It is usually best to go for a business line of credit as a secondary source of income rather than a primary source.
Good credit goes a long way in terms of being able to get a business line of credit. You should keep your debt to income ratio low so you can qualify for business lines of credit at a more competitive rate of interest.
If you do qualify for a card, there are a few things you need to remember. Always check the interest rates and fees on the application form when you fill it out. Many business cards offer annual percentage rates, which means that your monthly payments can vary greatly from one month to the next.
A regular credit card offers a low rate of interest, but a high monthly payment; with a business card you pay a lower rate of interest and pay a lower monthly payment. However, even with the lower interest rates, you will still be paying much more than a regular credit card.
You should also make sure that you will have enough money to pay off the balance on your credit card before the expiry date. This means that if you have an overdraft it is not an option, as this can bring up the monthly repayment amount beyond the card’s limits.
A business line of credit is generally a better option, as it allows you to access cash when needed. This may come in handy if you are running out of money for your business before your normal income.
With a credit card, you have to remember to pay your bills on time, whereas with a business line of credit you don’t. You can often get out a business line of credit and use it as a credit card, and then be able to pay it off every month.
The other thing you need to remember when using a business line of credit is that it can only be used for your business or personal debt. Your debts should not be paid off using the line of credit.
It is also important to use your business line of credit responsibly. It is tempting to spend more than you normally would with a credit card, but remember that it is better to borrow money than to spend more money than you earn.
However, you should always try to keep the balance on your business line of credit low, so that it remains active. By keeping the balance low you are still building up a savings account, so you can use it for your business.
While it is usually cheaper to have a credit card, and sometimes more flexible in terms of spending, it is better to use a business line of credit instead. It is cheaper in the long run, and you can build up a greater amount of equity over time as you pay your monthly payment on time.