According to the Bureau of Labor Statistics, 74% of businesses fail within their first four years. Per SBA, the reason for their failure in most cases is insufficient capital, and lack of adequate funding. If a business starts out with hundreds-of-thousands of dollars available to them, they then stand a much greater chance of succeeding. When businesses don’t have funding to help them get started, they then use the personal assets and cash of the business owner and or profits to grow.
Today lenders are not eager to give business owners access to money. Even when the business meets all the lending requirements, many conventional banks still don’t lend money and don’t tell the applicant the reason why they won’t lend, they simply tell them no. Banks deny 89% of the applications for business financing, in an environment when 86% of business owners need cash and credit for survival.
This has made it harder through the years for business owners to access the money they want and need to start and grow their businesses. Most business owners only go to their own bank when they need money, and if that bank says no they have nowhere else to go.
Why You Should Have A Business Credit Card?
A lot of small to medium-sized business owners use credit cards in the course of business. The problem is, many make the mistake of using their personal credit cards. There are a couple of major problems with this:
- If you use your personal credit cards for your business you are blurring the line between business and personal finances. The better separation you can achieve between your business finances and personal finances, the better off you will be. For this reason, a business credit card in your business name is the best route.
- Using your personal credit cards for your business puts your personal credit at risk. If the debt belongs to the business, shouldn’t it be on the business’s credit? Most people don’t think this is a big deal until they run into problems and no longer have their personal credit to fall back on. In one example, a couple in business together racked up over $100,000 of unsecured debt on their personal credit for their business. When the business’s income dropped, even though the business was at first able to stay afloat, the couple was forced to file for bankruptcy. With their personal credit destroyed, they could no longer get credit to support the business–and the business went through some serious struggles as a result. The couple is now divorced, no doubt in part due to the stress from those difficult times.