Rule of Four – What You Need to Know About Small Business Financing Credit Cards

Money is not everything. There are travelers’ checks, money orders, and credit cards. When you start your own business, there’s a way for you to obtain much-needed capital, too. This way is called small business financing credit card.Small business financing credit card, also known as small business starter credit cards, is a great way to keep your personal and business finances separate.Personal Credit Card Versus Small Business Financing Credit Card
In the past and even at present, lots of entrepreneurs rely on their personal credit to get their business up and running. The problem with this is that they carry the debt from their business into their personal credit cards. Ultimately, they end up hurting their personal credit scores.This is where small business financing credit cards come in. They offer higher credit limit. Additionally, they keep business and personal expense separate, thereby making it painless to track tax deductions. More importantly, you may write off your small business financing credit card’s finance charges and annual fees.Why Get a Small Business Financing Credit Card1. Build CreditA small business financing credit card is a good way to build a financial history. Your business is a start-up; it’s unknown. This makes it difficult for your business to obtain loans. A small business financing credit card will remedy this. It will provide banks with the spending footprints they need to reassure themselves you’re a responsible borrower.2. Avoid InterminglingWhen it comes to managing your expense, there’s one thing you should always do. Segregate, segregate, segregate. Do not mix business and personal transactions. This might later on create tax and money management problems.3. Prevent Shoebox AccountingIt is always a nightmare to track business expenditures. With a small business financing credit card, however, you can turn the nightmare into one you can easily snap out of. Your credit card company will provide you with a year-end statement where you can find your transactions summarized, itemized, and categorized. With such a report available, there’s no need to keep a shoebox stacked with receipts.4. Special RewardsThe credit card industry is so competitive providers fall over themselves to lure borrowers. Accordingly, a reward and discount program for small business credit card users was developed. Every time you use your small business financing credit card, you qualify for discounts and rewards, ranging from office supplies and plane tickets to phone services.How to Manage Your Small Business Financing Credit Card EffectivelyCredit cards, whether personal or corporate, will always be open to potential abuse. Effectively manage your small business financing credit card by:1. Limiting card hoppingSure, you qualify for multiple cards, but this does not mean you should sign up. You shouldn’t. This will only tempt you to overspend. It will hurt your credit rating, too.2. Steering clear of cash advancesNever use this credit card feature unless you need to bail yourself out of jail. It comes with whooping credit card fees and interest costs.3. Avoiding late paymentsThe more delinquent your payments are, the higher the fees and interest rates you would be saddled with. Moreover, late payments hurt your credit reputation.4. Using graceMany companies offer a 21-day grace period to clients before asking them to pay for purchases. Turn this to your advantage by drawing up a schedule of your purchases and payments.Use your small business financing credit card prudently. Remember, credit cards should be a financial safety net, not a trap.

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Website Business For Sale Transactions – Owner Financing Becoming the Norm

With the state of the world economy in a seemingly endless free fall, the climate in the business for sale market place has cooled along with many other industries. There is a lot more caution and fear in the market, with buyers selecting only the most resilient of opportunities that have been able to weather the financial tsunami.Consequently, there are many more sellers emerging from this morass, listing their businesses and hoping to find a buyer to cash them out so they can consolidate and protect their wealth during these uncertain times.On the other hand, there are fewer buyers with the available capital to consummate a deal with the sellers. To make matters worse, the tight credit markets have all but assured that available credit previously easy to attain, has all but dried up. In fact, the SBA arm of the government that guarantees small business loans through the banks has recently curtailed their criteria that literally handcuffs most qualified buyers from acquiring financing.In essence, they have determined that a business’s goodwill can only represent up to 50% of the value of the total business appraisal or a maximum of $250,000. The balance needing to come from tangible assets such as real estate, equipment, computers, inventory etc. This means the virtual tanking of any hope for website business buyers wanting to finance internet businesses because the majority the valuation is going to be goodwill based off cash flows rather than the virtual or intangible asset of the website itself!This has now created a major trend towards seller financing in order to successfully close a deal. There are several advantages to this type of structure. First, the deals close much quicker. SBA loan transactions can drag on for 3 – 4 months before they are fully funded. Seller financed deals can close quickly because they are less formal and the collateral is the website business which will be repossessed if the buyer defaults. In addition, the seller can earn a much better interest rate on the balance than they would in the bank or a CD or treasuries, so they will actually earn more in the long run, especially when the tax implications are considered. Taking monthly payments, as opposed to one large lump sum at close, can defer taxes and potentially reduce the tax bracket and consequent liability over the long haul.The perceived disadvantages are added risk of default, longer payout time frame, and lower cash at close. Risk can be mitigated based upon the strength of the buyer and their credit rating and history of prior entrepreneurial success. Owner financing is only appropriate with the most qualified of candidates and with a reasonable % paid at closing. The typical percentage of owner financing occurring now is 25% -50% with a few rare exceptions of up to 75%.In the end, both parties who want to get a deal done need to make compromises so they can achieve the mutually desired goal of completing the business for sale transaction successfully.

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