Small Business Credit – Avoid Mixing Business Debt with Personal Debt

- Small business credit, avoid mixing business debt with personal debt, it will cost you and the protections are limited. Consumers are already benefiting from the CARD Act, which limits the amount of increase credit card companies can make and provides other protections from fees and unfair term changes. Some business owners are waiting for similar regulations to roll out in favor of their use of business credit. However, the government has not done so yet. Until that time, it is up to the business owner to ensure he or she is using credit in the best manner possible.

One of the biggest problems that small business owners have is the separation of personal and business debt – a critical step that must be followed if you are to protect yourself financially down the road. If you mix business and personal debt, you may find it hard to track that debt, hard to get tax deductions for qualifying purchases and you put your personal assets on the line for business debt. In many ways, if you do not have a separation of business and personal debt, you may end up with a credit report filled with business debt.

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The Statistics

Small business owners are not new to credit card debt.  According to the National Small Business Association, credit cards have become the most common source of funding for small business owners. More so, in 1993, only 16 percent of business owners used credit cards as a source of funding, whereas in 2008, 44 percent did.

What You Can Do

As a small business owner, realize the importance of using credit cards. These cards can:

• Enable you to increase cash flow availability to the business
• Ensure your business has the means to purchase inventory even in slower seasons
• Minimize the business loans you need or carry
• Help to organize your business debts for easy tracking and tax reporting
• Allow you to expand your business, as you need to do so.

However, you need to use business credit in the right manner to avoid complications. For example, a small business credit card should only be used for business needs. Never make purchases for your business on your personal credit card, either. Doing so could end up costing you significantly in several ways:

• Your credit report may end up with a significant amount of business debt, driving down your score. As soon as possible, establish your small business as a secondary identity from yourself.
• If you track your expenses using one or two cards, separate from your personal accounts, you can report those expenses on your taxes, potentially reducing what you owe.
• Realize you do not have any additional protections for your business debt as you do for your personal debt. Lenders can increase your rate and charge higher fees (and many of them are doing so). For this reason, ensure you always have the best credit cards available.

Finding the right credit card is critical. The good news is that you will find many lenders want your business. Some give sizable rewards to those consumers who earn them.

If you are a new business owner, or just working on establishing yourself, the SimplyCash Business Card from American Express Open is a good bet. It allows you to earn up to five percent cash back on your wireless services and other business purchases, while earning three percent on cash purchases and one percent on everything else. You’ll save on numerous business expenses with this card. There APR is low, too.

Alternatively, consider the New Ink Cash Business Card, which allows you to earn up to $250 in bonus cash back. You’ll earn up to five percent cash back on the purchases you make up to a certain point and this card has an attractive introductory offer as well.

The bottom line – small business owners need to take better steps to manage their credit use without the aid of the government regulations consumers have. Finding the right card can help you to do this.

Small Business Credit