It is often a concern for businesses to determine whether they should be relying on credit cards or not. Well there are several things that should be taken into account and you should also be aware of what you should do in that regard.
Cost: Business credit cards can be the short term option for getting the required funding and the interest is normally high which can quickly add up if you are not able to pay the balance on time and fully every month. Over extending financially can be easy as you can go over your credit limit incurring penalty payments or late fees.
Credit issues: Problem in paying or late payments would add up giving you the negative credit which is definitely the last thing in the world you would want as it’s hard to get over it and it may impact your ability of getting other kinds of funding as well.
Security: It is also easy to use business credit cards in a fraudulent activity if they get stolen or if the number gets copied. Even the employees would be able to use it to their advantage if there is no clear authorization policy or if the use is not monitored.
What you should do?
Avoid interest: Whenever it is possible, you should opt for credit cards that offer you a decent period on purchases that is free of any interest. It may be possible for you to have credit of around 90 days prior to having to pay any kind of interest – though you must understand that the deals such as this tend to be in decline. Furthermore, they are usually available to the businesses that have a good credit history. It also has to be ensured that the debt is paid back inside interest-free time period.
Take it as short-term solution: Running the business on credit card would simply be not sustainable in the long run. It’s really expensive and a risky proposition and you must avoid it wherever it is possible. If at all you have to use credit cards to run your business, it should be ensured that plans have been made to switch to financial solutions that are more sustainable in medium term.
So, considering the major concerns about using business credit cards and the ways to deal with these concerns, you should decide whether your business should rely on one or not.