Using a credit card to finance your business

StrategyDriven Managing Your Finances Article |Business Credit Card|Using a credit card to finance your businessEvery company is different, and so every business owner needs to decide which finance options they want to use for daily expenses and longer term investments. Here, we weigh up the pros and cons of using business credit cards.

Many small business owners decide to use credit cards to cover costs, buy stock and seize opportunities. It’s easy to see why – they’re relatively straightforward to apply for and offer a flexible way to access credit quickly. But that’s not to say they’re the best funding option in all scenarios. This article details the ins and outs of using business credit cards, so you can figure out whether they’re right for you.

Generally speaking, there are five reasons to use a business credit card. These include: ensuring your business operations are kept separate from your personal spending, building up a credit profile for your business, managing short-term expenses, keeping on top of cash flow and picking up any rewards offered by the card provider.

What is a business credit card anyway?

In basic terms, a business credit card is similar to a normal consumer credit card – just designed for business use, rather than personal. Once secured, business owners and specific employees are able to use the card, or cards, to pay for things on credit – everything from small one-off costs, to recurring subscriptions and larger invoices.
Any accrued credit will need to be paid back, usually scheduled on a monthly basis, along with any interest that’s built up. Each card is different but most offer a period of free credit – this is often around 56 days. As you can imagine, to get the best out of a business credit card, many business owners use them for short-term expenses that they know they’ll be able to repay in a few weeks.

Can I use a personal credit card to fund my business?

Credit profiles take time to build up, so many new business owners can find that their company has a ‘thin’ file. This means they might not have enough of a credit profile to get a business credit card. In this case, owners sometimes use personal credit cards to fund their businesses.

However, by doing this the owner makes themselves personally liable for the debt incurred. In short, using a personal credit card for business finance means taking on a certain amount of risk. It is possible to use a personal credit card to fund a business, but many choose to upgrade to a business credit card as soon as they can.
What kinds of business use credit cards?

The use of business credit cards is highly common. Companies across all industries and sizes use them for their flexibility, to benefit from rewards and – in some cases – collect air miles. Almost all business credit cards come with the business owner’s or an employee’s name printed on, however, it’s the responsibility of the business to pay monthly bills.

Should you use a business credit card to fund you business?

As we mentioned up top, every business decision-maker should assess their situation according to their unique position. It’s certainly possible to use a business credit card to cover general expenditure and costs. That said, they tend to have five main disadvantages.

One of the key drawbacks is that business credit card suppliers typically don’t offer the scale of finance available through other types of borrowing, such as a business loan. Simply put, loans can give business access to larger sums of finance.

Something else to watch out for is that a number of card providers charge you a fee to withdraw money from a cash machine. That might not be a problem for many, but it’s worth bearing in mind if spending cash is a key component of your operation. Similarly, you may find that the fees you’re charged for foreign transactions are larger than with other options, such as a prepaid debit card with an overseas-focus.

Many business credit cards also come with a recurring annual fee. These are fairly small, but certainly worth checking out before you apply. Finally, unlike personal credit cards, business cards are not protected by the Consumer Trade Act, so the card provider is not obligated by law to protect you in the event of faulty goods or erroneous transactions.

What are the alternatives to a business credit card?

If you’re thinking about applying for a business credit card, you could consider the other finance options available for your business. First off, you could explore charge cards, which work a bit like credit cards. The main difference is that you’ll need to pay off the full amount of money each month, as charge cards don’t extend credit. Credit cards allow you to pay what you owe over time, though will likely charge interest left unpaid.

Beyond that, it could be worth looking into business loans or credit facilities. These enable enterprises to access more substantial amounts of money. Credit cards with high limits are hard to come by, so when requiring significant funds many businesses turn to these types of borrowing.

In summary

As you can see, there’s plenty to consider when thinking about business credit cards or the alternatives. So think about you business situation and try to plan out what kinds of funding will suit your unique situation best. After all, you’re the boss.

How to choose a loan that is best for your business

StrategyDriven Managing Your Finances Article|Business Loan|How to choose a loan that is best for your businessWhen your business is in dire need of a financial injection, you might be tempted to apply for the loan in haste. People do that all the time not realizing the golden rule that “haste makes the waste”. By the time reality shakes them, it is often too late. They can’t do anything but bear with the scary consequences.

Smart businessmen take their time before stepping into this extreme decision. Because they know it can make or break their years of hard work. You should also take a leaf out of their book and choose the loan by carefully evaluating the following angles:

Be Crystal Clear About Why You Need a Loan

That’s the first and the most critical step at the same time. It is very important to have clarity about why exactly you need the loan because the choice of your loan will be based on that. Understand, there are different types of business loans for everything.

For example, account receivable loans might not be an ideal choice to tackle issues other than cash flow. Similarly, if you want to buy office equipment, you will have to stick to the loans which are modeled according to this very need.

The takeaway message being, you should nail down the precise reason and purpose of the loan otherwise you will lose your way in the cobweb of multiple choices of lenders.

Consider the Duration of Getting a Loan

Well, some loans take more time in approval than the others. At times, businesses foresee the need for a loan and apply beforehand to avoid any delays. However, sometimes we are met by emergencies or it is simply not convenient for us to wait for weeks and need the loan in a matter of a few days. In such cases, fast loans swing into actions.
It is pertinent to mention here that if you have a good record of previous loans, you can save a few bucks on fast loans. However, generally speaking, these loans come up with easy and flexible process but they are comparatively more expensive.

For example, factoring is one of the main types of fast cash. But there are multiple factors will affect your invoice factoring rate such as your industry, size of invoices, creditworthiness and so on.

Estimate the Amount Needed

It is equally essential to know how much money you actually need. Many people apply for the loan just to get as much money as possible. This approach is sure to backfire in the long run.

Even if your documents are in good shape and you can easily be qualified for the bigger finance, still you should not transgress the amount you need. Because businesses have their ups and downs so why take a risk that does not make any sense?

That being said, you should also not apply for an amount so small that you become cash-strapped in the middle of a project. Therefore, be watchful while calculating the costs of your assignment. To be on the safe side, consult an expert who can estimate the right amount for you.

Shop Around

Once you are done with the above steps, it is time to seek a lender. The majority of the borrowers tend to settle for the nearby lender. Just because it saves them time and energy. That’s a non-starter. The best way is to shop around and compare rates.

Better still if you ask for suggestions from your friends. Being affiliated with a trustworthy lender comes up with a cushion.

The Last Verdict

It is important to qualify for a loan but it is even more important to get a suitable loan – the loan of your liking. There is no use of getting a loan that does not seem fit for your end goal. A bad choice of financing is more likely to haunt you in the big scheme of things.

7 Common Mistakes to Avoid When Doing Payroll for a Business

StrategyDriven Managing Your Finances Article |Payroll for a Business|7 Common Mistakes to Avoid When Doing Payroll for a BusinessDo you have employees? That’s great! All you have to do is cut them a check to pay them, right?

Unfortunately, it’s not that easy. That’s what has led the payroll industry to grow to a size of $81.5 billion.
If you’re handling payroll for a business yourself then you need to know what to look out for, so you don’t make any mistakes. Keep reading to learn seven common payroll mistakes that can cause problems for your business.

1. Missing Deadlines

When you deal with payroll, your employee paychecks aren’t the only money that you’ll be paying out. You also have to deal with government taxes.

You need to make a note of when your federal and state tax deadlines are for payroll. If you want to avoid missing your deadline, then either set reminders or automated payments for your tax obligations.

2. Not Keeping up With New Laws

Laws for payroll don’t stay the same. In fact, they change all the time. If you don’t stay up to date with what’s happening with the current laws, then you’re asking for trouble.

By staying up to date, you can make sure that you’re always following the law. You won’t have to worry about your next audit finding something that you missed.

3. Not Sending Tax Forms

Every penny you pay your team gets reported to the government. Shouldn’t they be the ones who send out your employee’s earnings for the year?

Wrong. That’s up to you to do. Make sure that all your employees receive their 1099 forms by the due date.

4. Bad Records

It’s required by law to keep all your records up to date, accurate, and available for several years. If you don’t, then you can face fines from the government.

This is why it’s necessary to invest in a record-keeping system that will keep things up to date. But keeping records in order isn’t easy. Contact a payroll service to get help getting your data in order.

5. Ignoring Garnishes

It doesn’t feel good to take payment from your team’s checks. But if you get a request from the government, you need to take action immediately.

Any mistake here can lead to a time-consuming process to correct.

6. Miscalculating Overtime

Overtime pay isn’t optional when you have hourly employees. You’re required to pay them for any extra time they work for your company. If you don’t keep accurate records of overtime hours, then you’re going to have problems paying people for their time.

7. Not Keeping Backups

If you’re using cloud software to handle payroll, then you don’t have to worry much about data loss. But if you manage everything locally on your office computers, then you run the risk of losing data.
Make sure to put a backup plan in place to save your data in case this happens. A backup service costs money but will save you time and money in the long run.

Payroll for a Business Isn’t Easy

If cutting a check to your team was all it took to do payroll, then the payroll industry would be doomed. But payroll for a business isn’t that simple. Make sure you avoid the mistakes above so you can prevent costly mistakes.

Are you looking for more business advice? Keep browsing our blog to read through our latest tips.

What are the Best Working Capital Loan Options in 2019?

StrategyDriven Managing Your Finances Article |Capital Loans|What are the Best Working Capital Loan Options in 2019If you are operating a start-up, you may face problems with managing the cash flow of your business efficiently and may have to rely on working capital loans. Working capital loans are not utilized for long periods or the purchase of noncurrent assets due to their short repayment period. Instead, they pay for the operational costs of a business and is a good indicator of the short-term health of the business. Every industry goes through a period where the revenues plummet and affect the amount of working capital available.

In an ideal scenario, you might be able to increase your working capital by generating more revenue, but this is not possible at all times. Instead, businesses operating on a small scale rely on loans to satisfy their capital deficiency. The following working capital loans mentioned below are being used by small businesses in 2019 to stabilize their cashflows.

1. OnDeck:

OnDeck offers working capital loans to borrowers with a minimum credit score of 680 with rates around 9%. The repayment period is relatively long around 36 months, and customers can borrow up to $100,000. It also offers a line of credit which has a repayment period from 6 months till one year. You can apply for OnDeck online with the application taking less than ten minutes to be completed. To qualify for OnDeck, you must have a credit score of at least 600 and must have a business history of one year. Although the requirement of $100,000 is not ideal for start-ups, most small businesses can meet this requirement.
While OnDeck generally has positive revenues on the website due to the easy financial process and excellent customer relations, it does charge an origination fee of up to 5%. Along with that, even if you repay your loan early, the interest rate will remain the same for the entire term of the loan.

2. LoanBuilder:

LoanBuilder is another working capital loan for small businesses that have been in operation for at least nine months. The repayment terms are from 13 weeks to 52 weeks, and you can borrow up to $500,000. This provides flexibility to the borrowers since they do not need to worry about immediate payment. LoanBuilder offers single fixed free loan pricing on working capital loans. However, you do not benefit from paying the loan early since the interest rate remains the same. You have the option to choose the repayment term, although long term options come with additional fees. In order to qualify for LoanBuilder, you must have a credit score of at least 550 and above with gross revenue of at least $42,000. Apart from that, your business must be located within the United States and does not have a history of filing for bankruptcy. The perception about LoanBuilder is generally positive and is praised for its quick process and efficient response. Customers who left negative reviews said the pricing was too expensive.

3. BlueVine:

A BlueVine loan is suitable for businesses that have unpaid invoices within 90 days. BlueVine offers a loan of up to $5 million with weekly rates of 0.25%. There are no origination fees attached to BlueVine, and you do not have to apply for it again. This differs from other types of loans as it does not have any termination fees either. To qualify for a BlueVine, you must have a credit score of at least 550 and a gross revenue of $100,000. You can apply for it online with the application requiring less than 10 minutes to be filled. Although BlueVine offers the highest funding amount, your business must invoice other government businesses to qualify. If you do not invoice B2B customers, then the working capital loan would not work for your business. BlueVine generally has good reviews from customers who were impressed by its services and customer support team. Critical reviews usually came from those customers who were denied financing.

4. Funding Circle:

Funding Circle is an outstanding working capital loan for businesses needing medium-term loans with low rates and monthly payments. Although it does not have a minimum credit requirement, you need a score of at least 620 to qualify. You can borrow up to $500,000 for rates as low as 5%. The interest rates are determined during the underwriting process and generally depend on the repayment terms. The qualification terms are more stringent compared to other loans because your business is funded by a variety of investors. Some of the requirements consist of a credit score of at least 620 and an annual gross income of $120,000. Your business also should have been active for at least two years. You can apply for Funding Circle loans online, and the application gets processed in ten days. The reviews of Funding Circle are generally positive since people appreciate an easy process and transparent fees. People who criticize it do it due to its documentation process.

5. National Funding:

National Funding is suitable for those customers who have a poor credit rating. This is because you can borrow up to $250,000 with no credit score requirement. Although you can borrow a large amount, the interest rates are high compared to other available loans. The best option is to contact National Funding for a customized quote. The qualification requirements are almost negligible with no credit requirement, and you must be doing business for at least one year. Your monthly credit card transactions should be over $3000. The reviews for National Funding are mixed with customers praising its quick process but criticizing its high-interest rates.

Conclusion

For a growing business, having enough working loans is critical for its daily operations. According to online reviews, the following are the top loans available in 2019 for small businesses to capitalize on. Based on the analysis, OnDeck is generally suitable for small businesses since its terms are customer friendly. However, those customers with poor credit ratings can utilize national funding to get working capital for their business.

The most common financial mistakes graduate entrepreneurs make

StrategyDriven Managing Your Finances Article |Graduate Entrepreneurs|The most common financial mistakes graduate entrepreneurs makeAmongst the world’s ambitious graduates are some of the next generation’s entrepreneurs and innovators. Some will have a carefully defined business plan. Others will have little more than a dream and bundles of enthusiasm.

Starting out in business straight after Uni isn’t easy. For the bright-eyed grad, a lack of life experience and industry expertise, along with a mountain of student debt can make the business journey a particularly tricky one. A recent report by CNBC warns that with graduate debt at around $30,000 for many students, starting a business is a huge challenge. It really is no wonder graduate entrepreneurship is declining.

As well as student debt, there is also the issue of financial know-how. Let’s take a look at some of the most common financial blunders graduate entrepreneurs make.

1. Not having a business plan

Accounting firm, OS Accounting, say “One of the mistakes a lot of entrepreneurs make when launching a start-up, including graduates, is to forge ahead with an idea without proper planning. Starting a business without a business plan is risky. It’s the fundamental starting point for testing whether or not a business idea is feasible.”

A business plan sets out the financial and operational objectives. With a well-developed business plan, entrepreneurs are also much more likely to attract angel investors or secure funding from venture capitalists.

2. Overestimating revenue

Brimming with optimism, entrepreneurs are renowned for overestimating revenue. In fact, for many eager graduates launching a start-up, revenue expectations are unrealistic. David Cummings, an Atlanta-based tech entrepreneur who has founded 10 companies, understands all too well the pitfalls of overestimating revenue.

3. Overspending on set up

A whopping 29 per cent of start-ups fail because they run out of cash. Early-stage entrepreneurs face specific challenges as they often lack business skills. Many entrepreneurs overspend on office space and tech tools.
With remote working becoming the norm, the virtual office, where possible, can save a lot during set up. Taking time to properly research tech tools can also save money. Various pieces of tech often overlap – as they are charged per user, spend can easily go up if this isn’t given attention.

4. Misunderstanding the difference between profit and cashflow

Things can look good on paper, but if a business runs out of cash it is in trouble. Poor cashflow planning and running out of cash is, according to Forbes, in the top 10 reasons why entrepreneurs fail.

Not all entrepreneurs have savvy accounting skills when they set out in business. Some basic accounting knowledge can prove invaluable. Most businesses record revenue and expenditure when it is incurred (rather than when invoices are paid). This means it is possible for a business to be profitable on paper, but not have any cash in the bank.
Business coach, Stever Robbins says the difference between profit and cashflow is often the difference between success and bankruptcy. Being able to read the accounts and understand the cash position in a business is vital.

5. Mixing personal and business accounts

Running a business through a personal bank account is never a good idea. Business banking should be kept separate and the importance of this is all too often ignored by eager graduates who want to avoid the expense of a business bank account.

Mixing personal and business bank accounts can also turn out to be a nightmare when it comes to tax reporting. It makes it easier to miss expenses and could be an issue if the business is investigated by the Inland Revenue.
In an article for Inc., Levi King, entrepreneur, CEO and Co-Founder of Nav, advises never to mix personal and business finances for the following reasons:

• Separating business and personal finances helps you look legit
• It helps to achieve a stronger business credit score
• It helps with tax reporting

6. Not budgeting or planning for tax

All businesses have tax obligations to the state and locally, and tax bills can hit fast and hard. Ignoring taxes is one of the top business budgeting mistakes. Seeking tax advice prior to starting a business is also something many entrepreneurs fail to do, but with the right tax strategy, tax liability could be considerably lower.

7. Not having an emergency fund

Cashflow is king when it comes to business. Many graduates finish their education in debt, not with an emergency fund they can fall back on during hard times. The U.S. Bureau of Labor Statistics reports that approximately one-third of all businesses fail within the first two years because of cashflow issues.

Summary

In spite of the pitfalls, there are many advantages of launching a start-up as a new graduate. New grads actually make great entrepreneurs. Many graduates are both innovative and more financially-savvy than they get credit for. The student mentality of surviving on a pittance can also bring business benefits.

There are lots of financial considerations for graduates, including how to repay student loans and finding a deposit for somewhere to live. That doesn’t mean graduates can’t start their own business. Here are 8 reasons why as a graduate you might want to give entrepreneurship a go. Remember, business planning is key!