The Second Risk Is Related To Your Credit Score

Category: Finance.

The theoretical financial provisions made in the business plan may well not cover everything in practice.

This is where a business credit card comes in really handy. There are usually a couple of unforeseen and unplanned circumstances that will demand some additional cash. If you are asking whether it is absolutely necessary to have a business credit card, then the answer is: No, a business credit card is not an absolute necessity. The truth is that when a cash flow crisis arises, a business credit card offers you both the confidence and the cash to overcome the hurdle. But who says it cannot be of valuable assistance? Whilst financing the business from a credit card may seem a little expensive, it becomes essential if you need to buy a few items or pay for a transaction while your cash is still tied up in product inventory.

The monthly credit card statements offer a useful way of keeping track of your expenses. As long as you manage the payments on your business credit card properly, pay all the, in other words charges due for that particular period in full, it will actually help to have the business credit card in your wallet. Some business credit cards even come with a built- in microchip that downloads your account history when you log on to the website of your business credit card issuer. Forewarned is forearmed. As with any other transactions where debt is involved, there are some risks that you need to be aware of. The first risk is that that your personal finances will be inseparably connected with that of you business, especially during the early years of your having the business credit card. There is no problem with that if your business does well, and if there is sufficient cash to repay the business credit card debt.

When you complete the application form for a business credit card, the terms and conditions of the contract will contain a stipulation whereby which you agree to assume personal liability for the business credit card in the same way that you would for a personal credit card. However, if the business should ever fail to cover payments that are due, the business credit card issuer will turn to you. When you initially applied for the business credit card, the lender would have obtained both your personal credit record as well as that of your business. The second risk is related to your credit score. If the business misses its business credit card payments for whatever reason, this default will also be reflected on your personal credit report, thus affecting both your personal credit score and that of the business. A business credit card is a valuable financial safety net for any small business.

There is also the chance that if you run up too high a balance on the business credit card, lenders may decide that you are carrying too much credit- even if your payments are religiously current. Provided that it is managed with the same responsibility and prudence you would afford your own personal credit card.