Ducking Credit Card and Line of Credit Abuse

Many businesses start out by relying on credit cards and a healthy line of credit from home equity. These businesses might use credit when it needs to purchase something for the business or to keep the business from falling apart when customers took their sweet time paying their bills or the business allows payment plans get out of control.

While this process can work for a little while, it can catch up with the business. It can lead to the business having too many customers on payment plans, which in turns leads to late credit card payments and lowered lines of credit. Besides, customers on payment plans can also fall behind on their payments. Then you have to deal with getting clients to pay invoices on top of everything else. Once you fall behind in credit card payments, you're paying more because of the interest and penalties for late payments.

Instead of letting credit cards and lines of credit spiraling out of control, stay on top of them. Offering payment plans might not be wise -- depending on your business. Perhaps, you can require half up front for those who want a payment plan and set a deadline for paying the rest of the bill.

In setting the deadline, consider posing late payment penalties for missed deadlines. The credit card companies have no problem in charging you late payment fees, you need to pass those on to the late paying customer. You might be worried that it'll affect the relationship. However, when you state this up front -- they know you're running a business and have plenty of time to complete the transaction. It's always easier and cheaper to retain current clients than to hunt for new ones.

Also investigate your spending habits. Are you buying too much in order to offer your customers choices? In today's society, people are overwhelmed with choices. You might find it works better to limit your offerings.

No matter how much you love what you do -- it's still a business. Keep an eye on finances and build strong relationships. Those relationships can create opportunities such as discounts and more business from word of mouth.

Thousands of businesses rely on lines of credit and sell accounts receivables to stay afloat and grow their business. The key comes in managing the finances so they don't fall apart.