Step away from the plastic
Warning to all small business owners: Get ready for an avalance of credit card offers.
There’s a movement afoot to get small business owners to buy more stuff on credit.
Since credit card companies have all but tapped out the consumer market by getting many of them to sit back in a thick recliner of debt, they are now turning their attentions to you guys.
Run! Run the other way.
Consumers are swimming in debt. Let’s not push small business owners into the pool any further.
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Right now, the men and women that run small firms combine a mix of financial sources to fund their businesses, with less than 50 percent of small companies saying the plastic menaces are their primary source, according to the
National Small Business Association.
The last thing an entrepreneur needs to do is max out their credits cards.
I know. I know. A lot of business owners funded their companies initially on credit but that doesn’t mean you should continue the debt feast.
While credit cards top the list of funding sources, small business earnings are close behind, at 43 percent; followed by bank loans at 29 percent and private loans at 22 percent, the NSBA reports.
I’m sure credit card companies wouldn't mind seeing credit card debt push out all those other sources; and easy access to credit and credit card rewards will be hard to resist.
A story in the News Journal, a local newspaper in Delaware, where many of the nation’s credit card operations are based, talks about how credit card issuers now have their eyes on you.
The reporter quotes a credit card consultants and industry sources: “For the top credit card issuers, the only way to get new customers in a saturated consume card market is to steal them from a competitor, or win over young consumers who are getting their first card. In comparison, small business is a relatively untapped market that card companies can easily move into.”
This past year, the article goes on to say, JPMorgan Chase & Co. has “renewed its push into the business card segment, partnering with companies such as Office Depot, UPS, Marriott, Michelin, SYSCO and GM to market business cards with rewards geared toward the small business owner.”
So just be conscious that you guys are indeed the next target.
Already, many small firms are carrying big balances, the NSBA numbers show. Overall, about 71 percent of companies who use credit cards carry a balance; and within that group 36 percent carry a balance of $10,000 or more. Only about 29 percent pay off their bills at the end of the month.
“When you carry high credit card balances, it destroys your business credit just as it destroys personal credit,” says Lynette De Nike, the credit advisor for
AllBusiness.com.
Here are some of her tips:
1. Charge only what you can pay off every month.
2. If you need to carry an ongoing balance, don't use credit cards.
3. Establish a line of credit with your bank. The interest rate will probably be lower than your credit cards and the line of credit will reflect positively on your credit ratings.
4. Avoid the tempting reward lures from credit card companies.
5. Most businesses need a handful of basic vendor accounts to operate smoothly, but you should not require more than two major business credit cards.
“And prevent a credit card sucker punch so you can qualify for the financing your business needs in the future,” she adds.
Amen sista!
