As an entrepreneur, it’s important for you to be aware of the risks and benefits of credit. Whether you are just getting started in business or if your company has been up and running for a significant length of time, knowing how to get credit when you need it and managing it effectively once you use it are critical to your success as a small business owner.
Credit is something that many small business owners need to use; it can be a lifesaver during start-up, expansion, and when cash flow is slow. Credit can also, however, hurt your business in the long run if you don’t use it wisely and carefully. There are many important factors to consider regarding small business credit.
When you need to borrow money for your business, consider all sources carefully. While it may be easy to open a new credit card, that is not always the best option. Make sure you understand the interest charges and fees before going this route, paying particular attention to the terms and conditions associated with any special introductory offers.
A new business owner might find it hard to get credit for the business on a stand-alone basis. Instead, it’s likely that he or she will need to personally guarantee the debt, unless the money is being borrowed against capital investments that can be used as collateral to secure the loan. Signing for a loan or credit card is not necessarily a bad thing, but you need to carefully consider what your signature means before you make a final decision.
It’s also critical to have a repayment plan. If you’re borrowing money to cover cash flow problems, make sure you have the ability to repay the money that you borrowed in a reasonable period of time and that the terms and conditions of the loan make financial sense for your company’s situation at the time.
Credit decisions should not be made lightly. Carefully consider what is right for your specific situation before deciding what route is the best option for you.
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