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Using Credit Cards to Finance your Business |
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Using Credit Cards
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Credit Cards, when used correctly can be a real benefit to cashflow. If you can buy items on a card then sell them or use them and get paid before you need to pay your credit card bill, then thats a good use of a credit card. Buying things like machinery or equipment and not paying off the whole amount at the end of the month, is a slippery slope.
Use credit cards for short-term borrowing only and always pay them off at the month end, almost like a charge card.
You can get personal credit cards with cheques these days (MBNA for example) which you can use anywhere, and often, a personal Credit Card will have a much higher credit limit than a business one. It is worth getting a couple of personal credit cards and keeping them for emergency business use only.
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Case Study:
A friend of mine runs a very successful computer business. When he was starting out he had an order for 37 TFT screens worth about £8k for a high profile local company. His main supplier only gave him a credit limit of £3k. In order to fulfil the order he used his personal credit card. By carefully choosing the odering date, he got six weeks worth of credit and the cheque from the customer had cleared before the credit card bill was due for payment.
- Tony says:
"It would have taken weeks to get my credit limit raised by £5k with the supplier, and I needed to be sure that I could get the screens for when the client wanted them. I have a good relationship with the client and knew that my invoice would be paid in full before I had to pay the credit card bill."
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