When you first start a business, you may want to set up a few accounts to establish credit in your business name. A merchant loan is available for businesses as so are credit cards that are issued in your business name. When you qualify for credit using a business name, you do not have the same protections that consumers have gained with personal credit cards. Your rate can be hiked arbitrarily and just because the credit is in your business name it does not mean you do not have to pay it back.
Borrow Only What You Can Afford
Businesses have many expenses when they are first starting, and a large line of credit can be tempting to use even when that money should be saved for emergencies. It is a good idea to bootstrap even if you have a line of credit available it can put you in the best financial position to succeed later on. It is estimated by some experts that for every $1000 borrowed by a new business, their chances of failing increase by 2.2%. The reason is that the business is using credit to fund growth long before the profits to repay the loan are evident. Use some credit to help start your business, but try to use only what you can afford.
Keep Track of Business Accounts
Just like personal accounts can be defrauded, so can your business accounts. If that happens by an employee, you might still have to pay for the damages even when you didn’t authorize purchases. You also want to see if purchases are being linked to your personal credit history, as business purchase volumes are much higher than personal ones and can damage your personal credit history. Check the interest rate every month to see if your creditor is trying to increase the rate and be aggressive in having the best interest rate possible by using competing lenders or paying off your balances every month.