Career 11 February 2017
A business credit card can be a smart way to earn rewards on your company’s expenses, pay purchases off over time and keep your personal and business spending separate. But make sure you’re smart in choosing and using your card by knowing these 5 things:
Some Rewards and Perks are Better for You Than Others
The business card rewards field is diverse. Some cards earn flexible travel rewards you can redeem for any travel expense. Others earn miles for a specific airline. Others earn cash back.
The bonus categories (categories that let you earn extra rewards on certain purchases) are diverse as well, encompassing everything from car rentals, to office supplies to digital advertising.
So instead of applying for the first card your bank offers you, research the field. Match your biggest expenditures to a card’s bonus categories. Make sure the rewards currency you earn will be something you actually use.
There’s a Difference Between Credit Cards and Charge Cards
Some of the most premium business cards on the market are actually charge cards. That means the balance is due in full every month. If you prefer to carry a balance and pay it off over time, a credit card is what you want.
Having your credit pulled can temporarily ding your credit score.
Your Personal Credit Will Probably get Pulled When You Apply for a Business Card
Especially if your business is a start-up, the bank will use your personal credit to get a read on you, in addition to looking into your business financials. If your personal credit isn’t great, you may not get the best terms on a business card.
There’s another hitch, too: Having your credit pulled can temporarily ding your credit score. So, if you’re planning on getting a big loan anytime soon to finance your personal goals (buying a home, for example), consider holding off on applying for the business card.
You May Have to Personally Guarantee Your Business Debt
Many business cards from major issuers have “personal guarantee” fine print. Scan the application for language referring to you being “personally responsible” both “individually and jointly” for charges made on your business credit card. It means that you’re personally responsible for any charges your business can’t pay. After all, the bank is taking a risk in extending credit to your business.
It’s possible to get a business card without a personal guarantee, but it can be tough, especially for start-ups without much money to show. So, recognize the risks -- if your business can’t pay off the card and you can’t either, collections and serious credit damage may be in your future.
Business Credit Cards Offer Things Personal Credit Cards Do Not
Once you recognize the risks of business cards, you can enjoy the rewards.
Issuers of business cards have created products tailor-made for entrepreneurs, with rewards and payment schemes personal cards may not offer. American Express, for example, offers a flexible-payment arrangement on its Plum Card, which gives you a rebate if you pay in full -- and 60 days interest free if you can’t.
Business rewards cards, meanwhile, offer bonus categories you won’t find on personal cards but that can represent significant outlays for companies – things like telecommunications expenses, shipping, office supplies and online advertising.
Depending on the rewards program, you can then feed cash rewards straight back into your business, or transfer points to travel programs for a future trip (business or pleasure).
Once you recognize the risks of business cards, you can enjoy the rewards.
3 Min Read
"How did you ever get into a business like that?" people ask me. They're confounded to hear that my product is industrial baler wire—a very unfeminine pursuit, especially in 1975 when I founded my company in the midst of a machismo man's world. It's a long story, but I'll try to shorten it.
I'd never been interested to enter the "man's" world of business, but when I discovered a lucrative opportunity to become my own boss, I couldn't pass it up—even if it involved a non-glamorous product. I'd been fired from my previous job working to become a ladies' clothing buyer and was told at my dismissal, "You just aren't management or corporate material." My primary goal then was to find a career in which nobody had the power to fire me and that provided a comfortable living for my two little girls and myself.
Over the years, I've learned quite a few tough lessons about how to successfully run a business. Below are five essential elements to keep in mind, as well as my story on how I learned them.
Find A Need And Fill It
I gradually became successful at selling various products, which unfortunately weren't profitable enough to get me off the ground, so I asked people what they needed that they couldn't seem to get. One man said, "Honey, I need baler wire. Even the farmers can't get it." I saw happy dollar signs as he talked on and dedicated myself to figuring out the baler wire industry.
I'd never been interested to enter the "man's" world of business, but when I discovered a lucrative opportunity to become my own boss, I couldn't pass it up.
Now forty-five years later, I'm proud to be the founder of Vulcan Wire, Inc., an industrial baler wire company with $10 million of annual sales.
Have Working Capital And Credit
There were many pitfalls along the way to my eventual success. My daughters and I were subsisting from my unemployment checks, erratic alimony and child-support payments, and food stamps. I had no money stashed up to start up a business.
I paid for the first wire with a check for which I had no funds, an illegal act, but I thought it wouldn't matter as long as I made a deposit to cover the deficit before the bank received the check. My expectation was that I'd receive payment immediately upon delivery, for which I used a rented truck.
Little did I know that this Fortune 500 company's modus operandi was to pay all bills thirty or more days after receipts. My customer initially refused to pay on the spot. I told him I would consequently have to return the wire, so he reluctantly decided to call corporate headquarters for this unusual request.
My stomach was in knots the whole time he was gone, because he said it was iffy that corporate would come through. Fifty minutes later, however, he emerged with a check in hand, resentful of the time away from his busy schedule. Stressed, he told me to never again expect another C.O.D. and that any future sale must be on credit. Luckily, I made it to the bank with a few minutes to spare.
Know Your Product Thoroughly
I received a disheartening phone call shortly thereafter: my wire was breaking. This horrible news fueled the fire of my fears. Would I have to reimburse my customer? Would my vendor refuse to reimburse me?
My customer told me to come over and take samples of his good wire to see if I might duplicate it. I did that and educated myself on the necessary qualities.
My primary goal then was to find a career in which nobody had the power to fire me and that provided a comfortable living for my two little girls and myself.
Voila! I found another wire supplier that had the right specifications. By then, I was savvy enough to act as though they would naturally give me thirty-day terms. They did!
More good news: My customer merely threw away all the bad wire I'd sold him, and the new wire worked perfectly; he then gave me leads and a good endorsement. I rapidly gained more wire customers.
Anticipate The Dangers Of Exponential Growth
I had made a depressing discovery. My working capital was inadequate. After I purchased the wire, I had to wait ten to thirty days for a fabricator to get it reconfigured, which became a looming problem. It meant that to maintain a good credit standing, I had to pay for the wire ten to thirty days before my customers paid me.
I was successful on paper but was incredibly cash deprived. In other words, my exponentially growing business was about to implode due to too many sales. Eventually, my increasing sales grew at a slower rate, solving my cash flow problem.
Delegate From The Bottom Up
I learned how to delegate and eventually delegated myself out of the top jobs of CEO, President, CFO, and Vice President of Finance. Now, at seventy-eight years old, I've sold all but a third of Vulcan's stock and am semi-retired with my only job currently serving as Vice President of Stock and Consultant.
In the interim, I survived many obstacles and learned many other lessons, but hopefully these five will get you started and help prevent some of you from having the same struggles that I did. And in the end, I figured it all out, just like you will.