How small business owners can qualify for credit
There are many reasons why a business might benefit from a credit card, from covering travel expenses to placing orders for office supplies. But getting your business approved for plastic in this rough economy is harder than ever.
Here are five ways to improve your small business' chances of qualifying for that all-important credit card.
1. Have a good personal credit score. If your business is new and does not have an established credit history, creditors will have a look at the business owner's personal credit history. Be sure you look after your personal credit history and have a good credit score. Check with a credit bureau to make sure your history is accurate and up-to-date. Take the time to have any discrepancies fixed.
2. Make sure you pay your personal loans. Nothing will get you turned down faster on a business loan than if you missed a car loan payment or credit card payment one month without any notification. Pay all your utilities on time. While this will not improve your credit score, if you miss a payment, then the information will be sent to the credit bureau, which will adversely affect your credit score.
3. Ask for a small line of credit first. By establishing a history of regular payments, and paying the debt off in full at the end of the year, you will gain an excellent credit score. The more your score improves, the more bargaining power you, as a small business owner, will have.
4. Don't ask for more credit than you would get with a personal credit card. Start small. Ask for a low credit limit, say $500. Once you have proven that the business is able to pay the monthly balance in full, the issuer will most likely increase your credit limit. This will pave the way for larger purchases, which the business may need to make in future.
5. If the business has been turned down for a credit card, ask why. Perhaps a different plan can be offered. For example, if your business is home-based, it may be asking too much to get a platinum card, but a basic type of credit card application may be approved.
If you do get rejected by one credit card provider, don't give up. Keep on building up your business' credit history, asking questions and applying for credit, until your business is approved for a credit card.Written by Melanie Dixon.
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