As a small business owner, you know that cash flow is always a concern. Most businesses, big or small, cannot operate effectively without the use of credit.

There are several different types of credit that you may decide to use. One of the easiest to acquire and use is a credit card.

Although there are pros and cons of using credit cards to finance your home-based business operations, the careful use of credit cards can be a smart choice.

What advantages do credit cards offer to a home-based business?

When used carefully, credit cards offer a rewarding and effective method of aligning cash flow for a small business. By maintaining low and workable balances, and by making payments in a consistent and timely manner, you can develop a favorable credit history, which is beneficial when your business requires additional financing.

Here are some additional advantages to having a credit card used exclusively for business related purchases:

• acquiring equipment and supplies can be achieved more readily if your business has access to credit.

• costs for expensive items can be spread out more evenly.

• choosing the right credit card and learning how to ‘float’ cards can often result in months of interest free credit.

• many credit cards offer buyer protection insurance as part of the package.

• credit cards provide a financial trail, which aids you and your bookkeeper in tracking purchases and expenses.

• “reward points” can sometimes be translated into even more savings for your business.

• because you are offered a pre-determined credit limit, assessing whether or not your business can afford a particular purchase is easy to ascertain.

What disadvantages are there to using credit cards to finance your home business?

As you are probably aware, it is easy to fall into the “credit card” vortex. Far too many failed home-based businesses have found out the hard way how easy it is to abuse credit cards. In hindsight, they realize how quickly credit cards spiral down from being an effective financing tool to becoming an albatross around their necks.

The ultimate goal of any credit card company is to make money and the primary source of their income comes from the often-exorbitant interest fees collected from their customers. Credit card companies rely on people who maintain high balances as their bread and butter.

Credit card companies love people who only make the minimum monthly payment because they earn a lot of interest from those customers. Ironically, some credit card companies refer to customers who consistently pay off their monthly balances as ‘deadbeats’ (tongue-in-cheek, of course). They obviously don't like it when smart consumers beat them at their own game!

How do you choose a credit card to best suit your home business needs?

With the ever increasing array of “special offers" from credit card companies, choosing the best credit to meet your home business needs can be a difficult task. Before you commit to any credit card, do your homework. Familiarize yourself with credit card jargon and always read the fine print before you sign on the dotted line. In particular, look at the repayment terms as well as the interest rates and service charges.

Aim to be a deadbeat

The smartest way to use credit cards is to pay them off in full each month. If you can do this, you'll earn the designation "deadbeat" and outsmart the credit card companies at their own game. Good luck!

The above article is intended for informational purposes only and should not be construed as financial or legal advice.