When you start out in a business, you may get a loan to help you get your business on its feet. After a rather long process of getting your business up and running and then paying back all the money you owe on the business loan, you can finally start making a profit off your business that you do not have to dip into to make any payments on loans. Still, there is a possibility that you will need a large amount of money for your business that you may not have, that will be needed immediately, without the hassle of applying for a loan, waiting to get approved, and getting the loan set up.
So where do you go to find the options you may need to take someday when your business is in a tight spot and is cramped for money? Where should you go to get the funds that will stand ready when you are in the middle of an emergency? Most business owners turn to business credit.
Business credit is like a credit card that you can use to get large amounts of money in order to fill the needs you may have within your business, and get that large amount of money in a hurry. Having such an account has several advantages, like the fact that you have so much money on hand when you need it, and you can get even get it in cold hard cash. Another advantage is that you can decide whether you want to pay your bill off when each payment period comes, or if you want to extend the time you spend paying the money back over a large time span.
However, even these advantages and more, it is important to know the risks you would be taking when you apply for business credit. Business credit has its disadvantages, and those disadvantages are based mostly upon your ability to handle your debt. Really, whether these factors are a disadvantage or not, is up to the borrower. Here are a couple of things that can really hurt you if you are not careful.
When you have a business, you often can separate your credit with the credit of the business. That way, if you make mistakes with payments on your own bills, it will not affect the business's credit score. Still, this can be a disadvantage in the fact that if you have good credit habits, your spending cannot affect the business's credit rating for the better. After all, if you are a disciplined credit holder all around, why not keep them both within your name, so that each can feed of each other and build up your credit score more quickly?
When you are representing a business, you not only have the power to buy on behalf of yourself, but on behalf of your business as well. This, in turn, will result in the fact that you can borrow a lot more money than you normally could if you did not have a business. This can be a pitfall for many people because they are too tempted to borrow beyond their ability to pay the money back.
