Compound Profit Blog

The five “Cs” of credit applications are as important when applying for a business credit card as they are when applying for personal credit. A credit card company’s main objective is to make sure you have the ability to repay any debit you amass. They are looking for:

• Character

• Capacity

• Capital

• Conditions

• Collateral

Some of the above criteria for applying for a business credit card are difficult to prove in a new business just starting up. In order to show character, capacity and capital you may have to start up without any credit and do business for long enough to create a reputation with vendors and have proven income.

Building a Business Plan

You might wonder why creating a business plan is so important when you’re just starting out, if you can’t use it to get credit at banks. The problem with a business plan when you are first beginning is that it is just a plan. It has no record of success. However, it still makes great sense to create that plan and follow it closely. Don’t make silly predictions or claim outrageously low expenses when you develop your plan. You need to be able to show that your plan up to the point when you are applying for a business credit card is working and on track.

That’s where the business plan comes in so handy. It shows you have a firm grasp on what you can expect, what has happened according to your plan, and then helps to prove your predictions for future growth based on the past. At that point, your business plan becomes a solid asset in applying for a business credit card or a business loan.

Valuable Vendors

Create vendor accounts as soon as you possibly can. Buying things from vendors on account even if it is only a 30 day billing period helps you develop your business credit and character. Apply for credit with vendors you will use regularly, and even if you only buy small items each month, keep your billing current so that you develop a strong reputation for reliable payments.

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There is a lot more to a business credit card than simply providing available cash. It is very important to have credit cards in your business name in order to protect personal credit ratings. However, depending on your needs there are other things to consider when it comes to what makes the best business credit card for your business. 

There are things like frequent flier miles and hotel savings that the right business credit card can provide for those that have to travel often on business. These are just a couple of the incentives that business credit cards offer. If your business doesn’t require you to travel, however, those may not be the right business credit cards for you, but that doesn’t mean that there aren’t others that will give you the bonuses you can use.

Types of Incentives Available

• Cash Back: Many business credit cards give you a cash back bonus simply for using the card. These bonuses may be general cash back on all purchases, or they may stipulate certain types of purchases. In other cases there may be several types of cash back bonuses on a single business credit card. For instance, the bonus from “SimplyCash®” business card from American Express OPEN that offers 5% cash back on office supply purchases as well as on wireless services. It also gives 3% on gasoline purchases and 1% cash back on all other purchases.

• Bonus Miles: If you travel heavily for business, or just want to take a much needed vacation you can choose a card like Capitol One® Spark Miles for Business that gives you thousands of frequent flier miles with no limits. There are no blackout dates for traveling, or any airline restrictions and you can even use the miles for cash back or gift cards if you decide you aren’t going to travel. Capitol One® also has a Spark card for cash if you prefer bonuses rather than miles.

• Bonus Points: Another form of bonuses are given as “points” toward special purchases. InkBold with Ultimate Rewards gives you 50,000 bonus points if you spend $5,000 in 3 months. If you have a lot of large expenses, or use your credit card for regularly recurring expenses this can be a very beneficial type of bonus.

• Hotel Bonuses: If you travel on business or for pleasure this type of bonus can save you a lot of money. Marriott Rewards Business Card is one of these types of cards. It gives you 1 point for every $1.00 spent, plus 2 free nights at certain locations throughout the year, no limits on the amounts you can earn, plus if you use your card to pay for hotel accommodations at a Marriott you will get triple points for each dollar spent.

What You Should Consider when Choosing a Business Credit Card

Remember that along with helping you protect personal credit, your business credit card will help you build your company. However, it’s important to determine what you need your card for in order to pick a card properly. If you need a business credit card to finance big, long-term purchases look for a card with a lower interest rate rather than big bonuses. In the long-run, you will pay a lot less for the overall purchases even after you take bonuses into consideration.

If you are using your business credit card to finance monthly expenses and make accounting easier, you will be paying off the entire amount every month, so interest is not a concern. In those cases, get the most for your dollars by choosing a business credit card with the most useful bonuses for your needs.

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The economy today is not doing so well, but this doesn't mean that you cannot obtain financing for your business. Here are ten ways your company can obtain the capital it needs.

1. Ask Someone In Your Family

If you are starting your own company, you could always ask a friend or relative who might have some extra cash laying around.

2. Use Your Social Network

Have you ever heard of social lending? It is like asking a friend for a loan, but doing so online and with millions of friends to choose from.

3. Put Up Your Own Assets

A bank might not be willing to lend your business money unless it has a solid track record, but you can put your own personal credit on the line. A house or car as collateral helps greatly.

4. Look For Angel Investors

Angel investors are people who are looking to invest in companies with potential. This isn't a loan, but the investment is an equity one, so they will obtain some percentage of ownership.

5. Sell Stock

The sale of stock will raise capital quickly for your company. Remember that you will be accountable to your shareholders if you go this route. They have the right to expect a profit, so make sure you can deliver.

6. Take Pre-Orders

Allow customers to pre-order and ask that they pay in full. This will raise capital before having to buy or ship goods. Think of it as a short-term loan.

7. Get those A/R To Your Bank Account ASAP

If a customer was delivered goods, but has not yet paid up, ask that the customer do so. You can even offer incentives to get that cash in a little quicker.

8. Micro Loans

A Micro Loan is a small loan that carries a smaller interest rate. A credit card could be as much as 22 percent APR for a small 1,000 loan, but a Micro Loan averages around 8 percent interest.

9. Sell Or Rent Assets

Renting an unused room could be a great way to raise cash. Selling your old copy machine could also be a great way to get some extra money quickly.

10. Credit Cards

If no other loan option is available, a credit card is a last resort. Beware of high APR's, but it could be a bailout when you are in desperate need of capital.

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Washington is constantly urging banks to increase lending. In spite of this, credit remains tight. Small business loan originations continue to lag and credit card issuers have significantly reduced lines of credit and canceled thousands of accounts. The American taxpayers bailed out the banks hoping that they would make loans and stimulate the economy. But given the current state of the economic mess, lending is probably the last thing the banks should be doing. Since the current recession was caused by an overextension of credit, making additional loans available doesn’t make sense.

Every loan carries the risk that it will not be repaid. Before making a loan, a lender must first accurately price the risk. If this isn’t possible, the lender reduces risk by lowering the total number of loans that it originates or the dollar amount of the loans. It has yet to be determined how costly new initiatives, such as cap and trade legislation and the healthcare proposal, will be on business. The unknown cost of these and other current regulations are interfering with the accurate pricing of risk. Therefore, lenders are reducing their risk exposure by reducing the number of loans they make.

Another hurdle for lenders is the risk-adverse nature of bank regulators. Although presidents and Congress have urged banks to make more loans, bank examiners have required just the opposite. Bank executives across the country have demonstrated that bank examiners have become extremely cautious in determining the value of a bank’s assets, thereby requiring an increase in bank reserves. This results in a reduction of lending.

 In an effort to control the money supply, the Federal Reserve began paying interest on bank reserves it held on deposit. Reserve balances immediately went up, and they have been rising ever since. Banks can borrow at low rates and place those funds on deposit with the Fed receiving a risk-free, guaranteed rate of return. This effort by the Fed to control the money supply and encourage lending has actually backfired.

In today’s tough economic environment, this risk of default is greater than it has been in years. High unemployment and the reduced value of collateral, such as housing, has required banks to tighten their lending standards to comply with more stringent bank regulations. As lending criteria becomes tighter, fewer companies and individuals qualify for loans.

Current economic conditions and levels of government oversight don’t support additional bank lending.

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Though building business credit has to be one of the more tedious activites of the entrepreneurial lifestyle, it is also one of the highest ROI activities that a business can undertake. Building and maintaining good business credit has many advantages and pays dividends far beyond the effort that it initially takes.

Some of the advantages of taking the time to build business credit:

1. Immediate respect from other businesses.

If your business is primarily B2B or if you have need of partnership with suppliers, having business credit simply greases the wheels of commerce as your business is immediately seen as more professional with a line of business credit. Some businesses go as far as to not do business with companies without a line of business credit, which could prove a make or break type of decision, especially if a business is planning a growth stage.

2. Ease of filing taxes.

Separating business expenses from personal expenses is never a bad thing in the eyes of the Internal Revenue Service. The hassles and money that you will save yourself in IRS audits, accountants, lawyers and lost time and manpower means that the effort you expend in obtaining business credit will more than pay for itself.

3. Getting business credit gets easier.

Once you have made that leap into getting business credit, you begin to build your reputation with your loan officer. The next time that your business has need of a credit line, you will find the wheels much less squeaky. So start early and do it now, because when you really need a line of business credit in the future, you will not have to make a scene to get it.

4. Peace of mind.

There are few things better than knowing that your personal assets are safe even if the business fails. This is perhaps the greatest advantage of separating personal and business credit - not having to guarantee your business with your personal assets.


How do I get business credit?

If you are having trouble obtaining business credit, there are companies which specialize in helping you to get it. These companies have already built relationships with financial institutions and will combine your account with many others to leverage better rates from the institution while decreasing the overall risk

 

for the institution. In this manner you can receive business credit lines that you would not be able to get on your own.

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A business credit card is very similar with a personal credit card, but it is owned by a company, and not by a person. In fact, the evaluation is very similar with the one that takes place when you compare business bank accounts and personal bank accounts.

Any experienced company owner will tell you that a business credit card brings in several important benefits when compared with a personal credit card, starting with flexibility, higher credit limits, low APR and several other business-specific advantages.

When it comes to business credit cards and small businesses, I strongly believe that one of the biggest advantages is the business expense tracking. Every small business owner knows that tracking all the company expenses can be a huge overhead; nevertheless, through the usage of business credit cards, this is done automatically, as long as you make sure that all your company’s purchases are made using your business credit card, while your personal purchases are made using your personal credit card.

It might sounds like a simple thing to do (and it is very simple indeed!) but most people forget to do this on a daily basis. Separating your personal expenses from your company’s expenses will allow you to have most (or all) of your company’s expenses listed on your business credit card bill, provided that you use your business credit card for most (or all) of your small business’ purchases.

Fortunately, the good news doesn’t stop here: many of the business credit card suppliers are aware of this expense tracking need, so they have set up their bills properly, in order to make the data on them as easy to use as possible for the small business owners. Some of these card suppliers will even offer the transaction records in a format that can be imported directly by the most used accounting software applications.

This benefit alone can save any entrepreneurs tens or hundreds of hard work, as well as hundreds or maybe even thousands of dollars spent with 3rd party accounting services. If you also take into addition the high credit limit offered by the business credit cards, you will see that these financing instruments can easily cover the costs associated with them within the first month of activity.

Compound Profit offers free information about building business credit, as well as a powerful business credit builder that guarantees results in only a few months. Contact us for more information.

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Many small business owners are using their own resources in order to finance their companies. This might sound like common sense, something that anyone could (and should) do, but going this route poses a major risk, because you are using your personal, important assets as collateral and if something bad happens with your company, you have also compromised your personal finances for good. And the things get even worse if you have got a family, because their personal security is also affected by your company’s stability.

Despite of this, many small businesses continue to run their daily activities using personal credit cards. Why is this happening? The reason for it is simple: most small business owners don’t know how to separate their personal credit from their business credit, even though the process can be quite simple, provided that you manage your transactions carefully. Separating your personal and business accounts offers a strong protection layer for your personal assets.

Getting a business credit card will offer your company many benefits; by building a good company credit profile, you will be able to get business loans and leases with lower interest rates and better terms. In addition to this, you will be able to have a larger merchandise stock and get goods or services from your suppliers at better prices. An often overlooked benefit is the organized manner in which you’ll be able to review and track your company’s expenses and improve its cash flow, because you will be able to monitor all the transactions.

If you are still using a personal credit card to finance your business, you are probably losing money because your company misses the benefits listed above and thus is unable to grow as fast as it should. And let’s not forget that by using a business credit card, you are also saving a lot of time because all your business transactions are recorded automatically; this will help you work more at developing your business and less at bookkeeping, etc.

Fortunately, more and more business owners are using small business credit cards to finance and improve their companies’ cash flow these days. Join them and separate your personal credit from your company’s credit for good by using MerchantCard, an ongoing access to cash business credit card that doesn’t have any upfront fees or closing costs. Contact us for a complimentary consultation and you will discover many more reasons why MerchantCard is the perfect financing choice for small business owners.

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Everyone knows it: having a bad business credit score will affect your company. As a result of this, you might not be able to get credit from neither the banks, nor the alternative financing solution providers. And if you don’t have a backing funding source, you are jeopardizing your company’s future in case that something goes wrong.

If this sounds like your story, I’ve got some good news: you can still get funding using several financing instruments, like unsecured and secured credit cards. With secured credit cards, you will need a security deposit in your bank account, which must be placed before you start using the card; this is the way in which you guarantee that you will repay the lending company. Secured credit cards will have a credit limit that depends on your account balance most of the time; this means that you won’t be able to make large purchases of goods whenever you want to.

In contrast, unsecured credit cards offer you the ability to purchase the needed merchandise without using any collateral; it’s true that the interest rates are higher and the late penalty fees are greater, because the lender takes on a much higher risk. Nevertheless, many business owners use this financing instrument, which offers them a greater spending freedom. I’ll have to admit that this type of funding isn’t for everyone, though; poor cash management can lead to greater and greater debt and can even paralyze your business.

So how do you choose the best credit card for your business? It all comes down to whether you are going to be able to pay your debt on time or not. Since your business credit score isn’t great, you could choose an unsecured credit card, but do this only if you are confident that you’ll be able to pay you debt in time; otherwise, the late fee penalties will make your business credit value drown for sure. Still, this is one of the best financing ideas if your business relies on purchasing large quantities of goods, provided that these activities produce a significant amount of profit which allows you to pay all the expenses, as well as the lender.

If you are a small company owner and don’t want to take on the risk of damaging your credit history records, a secured credit card is a better option because it helps you avoid the late payment fees. One way or the other, the most important piece of advice that I can give is to manage your finances with great care. Cash is a precious resource and our advisors, which have an average of 25 years of business financing experience, are here to help you. Contact us for your complimentary consultation.

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A friend of mine (let’s call him John) is really tempted to start a small business in his spare time. He has figured that he will be able to put about 30 hours / week into it, and since this particular business idea would allow him to keep his daily job, I have encouraged him to pursue his dream. Good business ideas still bring in a lot of profit these days, provided that they are actually put into practice; just google “million dollar homepage” and you’ll see the fine work of a young entrepreneur who has made 1 million dollars in only a few months, using an investment of about $15. And remember that this was happening back in 2005, when social media and viral promotions were virtually inexistent!

Anyway, let’s go back to my friend John: he needs several thousands of dollars in order to start his business and he is thinking of using a business credit card as a financing source. It’s a good choice if you’re just starting up, but each aspiring entrepreneur must be very careful with his / her money; otherwise, they might be forced to shut down their companies only months away from breaking even and becoming profitable.

So how good is a business credit card for this type of financing? If you aren’t that well organized, a credit card will help you sort the thing through, because it will give you the means to track down all your expenses and will thus help you maintain a good cash flow. Nevertheless, the business credit cards have a few particular aspects that need to be addressed carefully.

First of all, when you’ve just started your business, you don’t have a business credit score yet. Your personal and professional finances can’t be clearly separated at this point, because you’ll have to sign a personal liability agreement. The reason for this is simple: the lender has to take extra precautions, because he can’t foresee if your business idea is going to be fruitful or not. This means that if your business credit account is affected, your personal finances will be affected as well, and failing to make your business-related payments on time will dent your personal credit score for sure. Registering your company with a credit reporting agency such as D&B will help you start building business credit; later on, as you obtain a good business credit score, you will manage to get financing without being forced to sign a personal liability agreement.

John won’t hire anyone for now, but if you’ve got employees and they have access to your business credit cards in order to make company-related purchases, they might use some of that money for their personal purchases – that’s another issue you might need to address. It’s quite easy to set a credit limit for all your employees, though, or at least to keep track of all the expenses and report any problems as they appear.

In the end, if you pay the suppliers on time, you’ll get greater and greater business credit scores whenever you make a payment. The business credit cards are ideal financing instruments for businesses that are just starting up; otherwise, they would have disappeared a long time ago. And I’m sure that if John follows the advice I have given in this article he’ll max out the benefits that arise from having access to an instant source of cash to finance his business idea. If you are struggling to get financing, check out Compound Profit’s MerchantCard or, even better, contact us for a complimentary consultation – we will pick together the best financing instrument for your business.

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Don’t let anyone tell you something else: the small businesses play a major role in the American economy – there are tens of millions of small business owners paying taxes out there! Fortunately, it’s quite easy to start a new business these days, no matter if you’re planning to open an online bookstore or a gas station.

If you’ve just started a new business or you plan to start one, using a small business credit card in order to get the needed financing is definitely a good idea. First of all, a small business credit card will allow you to separate the personal expenses from your business-related expenses; using your own finances for your company’s purchases isn’t a good idea at all.

Some entrepreneurs are very organized and like to jot down all their expenses; if you aren’t like them, a small business credit card will be of great help, because you’ll receive monthly statements that show you exactly how much money you have spent each month. More than that, each payment that’s made using a business credit card can help you build business credit, and if you’ve got good business credit records for several months, you will be able to apply for a business loan, which will allow you to get access to larger amounts of cash with lower interest rates.

But what about established businesses? How can business credit cards help them? Even if your business is already profitable, picking a business credit card and keeping it in your wallet is a very good idea; this way, you will have access to a consistent source of financing, and this will help you get the needed money in case that one of your expensive pieces of equipment dies, etc.

As a conclusion, small business credit cards are powerful financing instruments that help you separate personal and business purchases and allow you to buy the needed equipment, merchandize, etc without using cash. Compound Profit has created a business credit card – MerchantCard – that can give you access to up to $250,000 per business location and allows you to have access to cash anywhere credit cards are accepted.

Contact us today for a complimentary consultation and you’ll discover why MerchantCard is preferred by hundreds of thousands of companies across the entire U.S.A. Here’s just a hint: availability increases each time payments are made.

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