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Ask The Experts
Credit Woes M
Traps to beware of when using
any dance retailers rely on credit cards to
finance their operations. With rewards
such as cash back or points that can be
have come to rely heavily on credit cards when
strapped for cash. DRN spoke with Molly Brogan
from the National Small Business Association
applied to additional purchases, credit cards can be a (NSBA) to find out the pitfalls to be aware of when
credit cards to fund your business helpful payment method for ordering supplies, using credit cards to finance your business.
financing marketing initiatives or replenishing
BY JACQUELINE DURETT inventory. The trick is paying it off in full each DRN: A lot of our readers used credit cards last
month. year when cash was in short supply. Is this
Lately, a new variable has emerged. Many business common among small-business owners? What
owners have seen rising interest rates and shrinking are the advantages of using a credit card to fund
credit lines for both their business and personal operations?
credit accounts—which is dangerous for those who MB: About 60 percent of small
businesses in the U.S. rely on credit
cards for financing, according to a
2009 survey conducted by NSBA.
Many retailers use credit cards to
purchase supplies, cover travel
Junior Full Page
expenses or buy additional inventory.
7 1/2” x 10” The main advantage is that it is
relatively easy to get a credit card in
the business’ name—much easier
than acquiring a traditional loan.
DRN: We’ve noticed that a lot of
new small-business credit cards
have hit the market recently.
What is the difference between
these and personal cards?
MB: Many credit card companies
market “small-business” cards, but
in reality these cards are not much
different from personal card
accounts. Small-business cards
usually carry a larger limit, but not
much beyond that; it is basically just
a marketing tool. Many people
believe it will help them leverage
their purchases and receive better
discounts, but I don’t think it makes
a big difference, personally.
DRN: What dangers do business
owners need to be aware of
when using a small-business card?
MB: Business cards hold the same
dangers as personal credit cards,
such as changes in terms and
variable interest rates, etc. In May
2009, Congress passed a bill
intended to protect credit card
consumers from these types of unfair
practices. Unfortunately, this bill
does not cover small-business cards.
Small-business cardholders are still
subject to any term changes made by
credit card companies—skyrocketing
interest rates, slashed credit limits
and extra fees—and these have
become rampant in the economic
downturn. Because of this loophole,
small-business owners have now
become a prime target for credit
card companies looking to profit
from deceptive and unfair practices.
DRN: Since there isn’t a big
difference between personal and
business cards, would you say that
it is smarter, in some cases, to use
26 DanceRetailerNews.com March 2010
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have become a prime
target for credit card
companies looking to
profit from deceptive
and unfair practices.”
—Molly Brogan, NSBA
a personal card rather than a small-business
MB: I think it can be. There is a big gray area
surrounding personal and small-business cards. A
card with the business’ name on it is still secured
by the owner’s personal credit rating and can
have lasting effects on their personal credit score.
The difference is that if it contains the business’
name, then it isn’t covered by the legislation.
DRN: Do you recommend having two credit
cards in order to keep your business and
personal expenses separate?
MB: I think it is easier for accounting purposes to
have two separate credit cards. But at the end of
the day, a small-business owner has to determine
which card is getting them a better deal—if it’s
their personal card, then that’s what they should
use, despite the increased difficulty it presents for
DRN: There are so many personal and small-
business credit cards on the market to choose
from, and it seems they all offer different 1/3h
perks. What should a business owner look for
6.5” x 6 5/8”
when choosing a card?
MB: The first priority is reasonable interest rates
and fees, including balance transfer fees. Any
other perks are secondary and depend on what
the business owner finds beneficial. For many,
getting cash back or receiving reward points that
they can use to make purchases is preferred. For
others, travel rewards may help them fund a
vacation. However, nothing replaces a fair and
reasonable interest rate.
DRN: What resources are out there to help
business owners make decisions about how to
finance their business?
MB: There are many counseling resources
available through the Small Business
Administration (SBA), and it also offers some loan
programs for small-business owners. Find your
local SBA office at www.sba.gov/localresources.
Other community organizations, such as a local
chamber of commerce, offer loan or funding
options for local businesses.
Jacqueline Durett is a freelance writer in New Jersey.
Molly Brogan has been the vice
president of public affairs for the
National Small Business Association
since 2003. The NSBA is based in
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