As the saying goes, money to spare likes god care. So, in order to manage your finances, you will have to guard yourself against errors most people do with money. In that way, you’ll develop smart money habits of an experienced business owner.
Common Money Mistakes
These are the most common mistakes of business credit holders and ways to avoid them.
1) Co-applying for a loan with somebody else
You may recommend a friend to get an online business loan if he is experiencing some troubles. Don’t get involved, though. This way you assume great responsibility. Remember that if in any case, the borrower won’t make the payments in time, it will reflect badly on your credit score.
Sharing is always good, except when it is your credit card number. If you aren’t safe, you may be under a threat of identity theft. The series of manipulations the scammers may do with your credit cards will only damage your credit history.
2) Ignoring the credit problems
If you feel like there are some errors in your credit reports or credit scores, don’t wait for the yearly report. Deal with the problems immediately for them not to reinforce and negatively affect your credit rating. If you are failing to make some payments or constantly looking for zero-rated business credit cards, you must rethink the way of managing money and react to these troubles more responsibly.
3) Closing old credit cards and opening plenty of new ones
You may not need them already or you don’t want to use them anymore. But be careful and don’t lose a part of your credit history as well. This may be a huge chunk of good credit history that is in every way beneficial to your business credit score.
Opening new credit accounts too often is unhelpful as well. Banks have perfected their ways of luring customers in with their generous offers, but be cautious: the tendency of opening new credit accounts will only make your business credit scores go down.
4) Maxing out or not using the credit at all
People are sure that maxing out the credit card at times isn’t harmful. Eventually, you will pay off everything. In reality, every time you max out your credit card it raises your credit utilization ratio. If you use a bigger portion of your credit limit, the bank managers will consider this as having money troubles.
On the other hand, some people avoid using credit cards in order not to be consumed by debt eventually. If you don’t use the credit, you won’t have any credit history. If you don’t show that you earn and have money, you won’t become a reputable client to the bank. At least, set up one monthly payment that could be reported to business credit reporting agencies.
Profitable Habits to Acquire
Here are the traits that a business owner wants to develop in order to become successful.
1) Being calculative and selective.
That means considering every step or risk you take and estimating the benefits it can bring or the damage it can cause to the credit score. A calculative person is always aware of the periods, terms and interest rates of the credit. Helpful practice would be to work out the procedures of how you will pay off the debt before even taking a loan.
2) Being honest about finances.
When running your own business, you must address the cash inflow and outflow issue absolutely bluntly. You can’t just estimate some numbers and build your plans on them. Remember: if your business is based on borrowed money – this is a loan. Yes, you are making some progress, but you will have to cut your own expenses if you don’t plan ahead.
3) Considering details and being disciplined.
Running the business implies freedom but it is also some hard work. In order not be lost in the numbers, you must have the book of accounts. This book is to hold details of personal and business credit ratings, as well as the profit and loss account. This way you will be able to plan in advance.
4) Looking for alternatives and credit opportunities.
Hope the best, expect the worst. A smart credit owner must always have a backup plan before the problem presents itself. Solving problems in a rush will lead you to the pitfalls of the loan scammers. But then again, keep looking for profitable financing offers that are good for the business.
As you can see it all comes down to four mistakes to avoid and for new habits to replace them with. This is an insight into what you may expect if you want to be a business owner and some bold steps to take as a beginner.
- Pros and Cons of Financing a Business
- Minimize the Risk to Your Personal Credit When Starting a New Business
- How to Avoid Destroying Your Personal Credit While Starting a New Business
- Starting a Greeting Card Business
- How to Use Business Credit Cards to Build Business Credit