Business Credit Cards More Valuable Than Ever
Despite a recent infusion of TARP funds to lending institutions, businesses continue to report tight credit conditions and a dependence on business credit cards for short term credit management. Recent news from local Florida retailers indicates federal action has not yet restored access to credit, according to an article by Bob Koslow in the East Volusia News-Journal last weekend.
Florida business owners reported abandoning plans to expand until traditional commercial credit gets cheaper, and also said pre-approved loans for expansion were being withdrawn by lenders. In the meanwhile, merchants are using business credit cards to buy inventory, with the cards being paid off as products sell, according to the article. Barton Weitz, executive director of University of Florida’s David F. Miller Center for Retailing Education, is quoted as saying, “It has not filtered down to where the banks are making new loans….To improve their chances to get new credit, retailers have to retool their business plans to reflect the times and show banks concrete ways they plan to cut costs. It’s not going to be good for the next 6-12 months.”
In this climate, it is increasingly important to build a good credit score to meet tighter lending standards; the credit cards that business owners already depend on to manage their cash flow can also be used to elevate scores. These days numerous experts are offering advice on how to raise credit scores through the use of credit cards, and they recommend carrying debt on multiple cards.
On CNBC, for example, John Ulzheimer recently advised having a mix of about five credit cards with small amounts spread among them. He says carrying a small balance (ideally 1-2%) and paying the minimum each month shows credit agencies that you can manage a revolving balance. This is important for raising your credit score and ultimately making it easier and less expensive to borrow money during these difficult times.
