The May 2010 article is not reporting that small business credit card rates are now 13.7%, the article reports that small business credit card rates have increased on average 13.7% in the last seven months, while the rates on consumer cards rose an average of only 2.4%.
We wrote about this possibility back in March in our summary of the CARD Act which left business and corporate cards out in the cold. Unfortunately this prediction has become a reality. Hopefully you took the time to get your small business financial house in order at the beginning of 2010, but even if you didn’t here are three things you can do now to help hedge your business against the rising small business credit card interest rate trend.
- Diversify your debt. You are probably already familiar with the concept of diversification when it comes to your investments. The same principles apply when it comes to your debt. Many small businesses found this out the hard way over the past couple of years. If your Advanta credit card or bank line of credit was your only source access to capital then you likely had a financial struggle in recent years as Advanta closed up shop and the list of banks closures increases weekly. Other options for keeping access to capital open include equipment leasing, business cash advance, non-bank short term loans and even selling unused equipment.
- See where you stand today. If it’s been more than a few months since you checked your credit, it’s a good idea to see if there have been any changes to your personal and business credit scores. Also, Direct Capital provides a free financial grader that will show you the types of financing your business qualifies for. The prudent thing for any small business owner to do is to always be prepared. You sometimes never know when the need for capital will come up, either for an emergency shortage or to take advantage of an opportunity. Take the steps today to be prepared for the future, which leads us to:
- Start planning now. Plan out your 2010 purchases and capital needs today so that you have ample time to plan and take advantage of financing programs, tax savings programs, etc. There are plenty of financing programs with fixed payments and even payments that are tied to your revenue. Both of these program types help avoid the risks associated with variable credit card and bank loan rates. There are also several programs designed to help small businesses climb out of the recession. Some examples include:
- Extended Section 179 benefits – the $250,000 deduction on equipment purchases has been extended through 2010. Calculate your savings use this free Section 179 tax savings calculator.
- Loss Carryback – Does the IRS owe your small business any money? As part of the HIRE Act, you may be able to recoup business losses from 2009. To find out if you may be eligible, use this free loss carryback calculator.
- New Hire Tax Credit – Also part of the HIRE Act, for any new employees that are with your company for at least a year the business will receive a $1,000 tax credit as long as there isn’t a drop of over 20% in that employees wages from the 1st half of the year to the 2nd half of the year.
How have your credit card rates changed in the past six months? What else are you doing to hedge against increases?
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