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How to Solve Problems with Business Credit Cards by Using Invoice Financing

By Rieva Lesonsky

Every small business owner needs to use business credit cards at some point—whether for meeting expenses on a business trip, purchasing office supplies online, or covering a shipment of inventory when your cash isn’t flowing smoothly. But sometimes, you can get in over your head with business credit cards. That’s where invoice financing can come in handy.

Getting out of a business credit card bind can be challenging, but it can be done—if you choose the right solution. Here’s a closer look at the pros and cons of business credit cards, how to get out of a credit card “hole”, and how to manage your credit cards wisely.

Business Credit Cards: The Good, the Bad, and the Ugly

Business credit cards have several benefits for an entrepreneur:

  • They’re convenient and quick.
  • Using credit cards properly can be an important tactic in building your business credit score.
  • Business credit cards may offer rewards such as airline miles that can help your business save money.

You shouldn’t stop using business credit cards altogether, but misusing them can lead to huge problems.

  • Late or missed payments lead to late fees and increased interest rates that can become extremely onerous.
  • If you’re paying only the minimum due on a large balance, that balance will quickly snowball.
  • Missed or late payments leave black marks on your business credit report that remain long after the bill is paid.

Invoice Financing: A Quick Solution

When you find yourself with a hefty business credit card bill and a temporarily tiny bank balance, one way to avoid the credit card pitfalls listed above is to quickly pay off the balance in full. But where will the money come from? Getting an asset-based loan when you have a lot of credit card debt is difficult to do. (Here’s an explanation of asset-based vs. cash flow lending options such as invoice financing.)

Invoice financing can be an ideal solution that quickly turns your unpaid invoices into cash. For instance, with Fundbox’s invoice financing solution, you simply create an account (it’s fast and free) and connect it to your business’s accounting platform. If approved, you’ll be able to obtain an advance on whichever invoices you choose. Unlike factoring, you’ll receive 100 percent of the invoice’s value—and your customers never have to know that you’re using Fundbox.

Time is of the essence when you’re trying to pay off a credit card bill before the due date to avoid late fees or interest rate increases. With Fundbox invoice financing, the money will go into your business bank account within a few days—sometimes as soon as the next business day—so you can make your business credit card payment with time to spare.

Take Charge of Your Business Credit Cards

Once you’ve gotten the balance on your business credit card back under control, follow these tips to keep it from getting out of hand again.

  • Keep your business credit card utilization to no more than 30 percent of your available credit. If you use a larger percentage of your available credit than this, it can negatively affect your business credit score. It can also make it harder to get business loans: If lenders feel that you are close to maxing out your credit, they’ll consider you a high
  • Use your business credit cards for the right purposes. Compared to many other business financing options, such as invoice financing, credit cards are a high-cost option. Because they also have a short repayment term, you should use them only for short-term business expenses you can pay off quickly, such as business travel—not for long-term or ongoing expenses such as operating costs.
  • Be sure to use a business credit card. Don’t use personal credit cards for business. Business credit cards report to business credit reporting agencies, which will help build your business credit rating.

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