We are talking about small business, not personal credit card usage.
Any business that deals with inventory is going to use some kind of debt (credit card, net 30, etc.) management to help manage their cash flow unless they have a nice pile of capital sitting around.
My brick-n-mortar store goes through 15k-20k of inventory per month, and while I could probably prepay for most of my inventory now, I certainly couldnt do it within the first 3 years of being operational.
Outside of running a 100% cash based payment due on the spot kinda thing (don`t we all wish we could) you are going to have float. I don`t know of many businesses doing B2B that will cut you a check on the spot when said product/service is delivered. They are going to float you 30-45 days on average. Have enough of those types of customers and you absolutely need to be able to float some of that debt yourself without severely impacting your cash flow.
I`m certainly not an expert nor have I been doing this as long as other people have, but one thing I have learned is that cash flow is king, the money needs to flow in faster than it flows out. I would be willing to bet a very very large portion of your business clients who come in to file bankruptcy had an enormous amount of monies in their Accounts Receivable that was 90-120+ days past due. When the monies are slow in coming in (perfect world everyone would pay when order is placed, but its just not realistic), and you continue to pay all your overhead, cost-of-goods-sold, payroll, etc. directly from your cash reserve, said reserve will be gone before you know it.
Having the ability to float some of that debt until the accounts receivable empties out is a gigantic tool that can be used.
I am a big fan of Dave Ramsey (of which your particular service is based around), used to listen to him on the radio every day until the stupid station switched to an all Disney format (uggh), but the envelope and debit card "system" he advocates isnt 100% realistic or feasible with every business model out there.
The sooner people as a whole start taking responisbility for their own actions and choices, the people like Dave Ramsey will have to find a new line of work.
Poor personal spending habits or the inability to manage one`s own finances does not mean that using debt in a business model is a bad way to run a business.
Hey jlukesavige, welcome back from your trip. I hope it was enjoyable.
I understand the nature of your comments now and I appreciate people like you, who want to help others and, in the process, see too many folks in trouble in a regular basis.
However, I`d like for you to understand that negative comments based on wrong forecasts are just not welcome. There are many people right now toying with the idea of starting their own business. As they read wrong information saying that only 30% of businesses are making money, they become discourage. Because this kind of comment is discouraging and scary. The reality is 70% of business are between making money and breakeven. Not to mention that research shows that a lot of business report loss because they dont report cash transactions to avoid taxes. These numbers are encouraging, uplifting, positive and they are real...very real.
So, point taken. I agree that poor manegement of credit cards can be as distructive as anything else in business. Hondo makes a great point about cashflow and the benefits of using creadit cards. We need to be careful and responsible. Just dont start to spin the numbers in order to make a point that isnt real. Businesses are doing well, creadit card can help, and most of the times it does, otherwise there would be no credit cards cause everyone using it would be out of business. We need to pass a positive message, when the message is real.
Thanks a lot again.
I did a lot of research on business credit cards when I started my business a few years ago. Like a lot of people, I used credit to finance my start up.
I wanted a card that would allow me to transfer some existing business-related debt (start-up expenses), charge a reasonable percentage on the debt I was carrying, and not gouge me for additional charges.
The best one I found is from Advanta - I`m paying 2.99% on the transferred amount and 9.99% on additional expenses. It`s been a lifesaver.