Get a Jump on Holiday Planning with Good Business Credit

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Black Friday is quickly approaching, and organized shoppers are already making their lists and checking them twice. Unfortunately, the holiday season tends to be a stressful time for small business owners who must prepare inventory, staffing and budgeting, while considering taking out loans or lines of credit to ensure a successful holiday season.

The holidays always come faster than we expect, making it critical for small businesses to start early in order to prepare for the busier months that lie ahead. Many small business owners could line up holiday staff and order extra inventory in their sleep, but they might be neglecting an important part of preparation – getting a handle on their current finances so they can pay for the extra staff and add to their inventory. Savvy business owners should determine what they need in terms of capital or credit to keep their shelves full and customers happy during the busy holiday season.

The responsibilities that go along with owning a small business are endless, so thinking about credit needs may fall by the wayside, but understanding business credit is crucial to a business’ overall financial planning. In fact, a recent survey found that 85 percent of small business owners said they don’t know or don’t think they have a business credit score. Additionally, three-quarters do not have a financial advisor or dedicated banker to educate them about financing options. SBOs should invest time in meeting with an advisor to check on their financial standing before a busy season.

One of the most important and easiest items your advisor or banker can help with is selecting a credit card designed specifically for small business owners. Business credit cards are a great way to track your heightened holiday expenses via credit, while earning cash rewards on increased business purchases in the process. Surprisingly, the survey also revealed that over half of SBOs are leaving cash on the table by not having a designated business card, even though only five percent of respondents had been turned down for a business credit or loan request. Increased holiday spending is unavoidable for many small businesses, so why not earn cash back?

When evaluating credit options, business owners should consider what would work best for their needs. A credit card is a great option for recurring or small expenses that can be paid off quickly, while a line of credit is useful for short-term expenses that can help the business expand, such as purchasing inventory or new equipment. It’s also important to review the available cards and their potential benefits to decide which offers the best opportunity to earn rewards. For business owners who are frequent travelers, a card that rewards on gas could be a smart option, or for those who regularly entertain clients a card that offers cash back on dining may be a better fit.

There are a few things SBOs should know when applying for business credit. It is essential to remember that your approval depends largely on your personal credit history. Banks can turn down entrepreneurs applying for credit or for a loan due to poor credit history or simply not having enough of it, or an unfavorable debt-to-income ratio. Factors affecting one’s credit history include: personal or business bankruptcies, prior judgments from creditors, late payments or not having enough business history. For individuals thinking about starting or expanding their own business, it’s important to ensure you’ve already developed strong personal credit for when a loan or line of credit is needed.

Once your card is approved, remember that keeping personal and business credit separate is important for the health of the business, as the business credit card will streamline the record-keeping process while simultaneously establishing credit history. This is crucial for business growth and preparing for future financial needs.

Although it seems early, preparing in advance will help small business owners maximize consumers’ expected increased spending this holiday season, and position their business for longer-term profitability.

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Head of US Bankcard and Merchant Services, TD Bank

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