Company Credit Card Use Rises

 

They arrive in the company mailbox every day-offers for credit cards especially designed for small businesses, with discounts and rewards ranging from office supplies to travel. For small businesses struggling to find funding, credit cards can be a tempting option.

 

According to a report by the Small Business Administration's Office of Advocacy, the number of small business loans outstanding under $100,000 increased 25% between June 2004 and June 2005, the most recent period for which data are available. The increase came mostly from credit card use. The SBA's data are in line with the results of a 2005 small business survey by the U.S. Chamber in which 15% of the respondents said that they used credit cards as startup capital for their small businesses, and 29% used credit cards to keep their companies going.

 

However, just like credit cards for personal use, credit cards for business must be used judiciously. "It may be easier to get a credit card than a traditional bank loan, but that convenience can come at a high cost if you don't intend to pay the balance off monthly," says Giovanni Coratolo, executive director of the U.S. Chamber's Small Business Council.  

 

Here are Coratolo's suggestions for using small business credit cards:

 

Long-term debt-For financing major equipment purchases, credit cards are generally not the way to go. The golden rule is to utilize a debt instrument in which the payments are amortized over the useful life of the asset being purchased. 

 

Emergencies-Having purchasing capacity available on your business credit card can be valuable for unexpected minor business needs. 

 

Monthly expenses-As long as you can pay the bill in full every month, credit cards can be a great way to accumulate valuable discounts and rewards.

 

For more information on accessing capital, visit www.uschamber.com/goto/financing.