A poor credit score can be a big overhead on your business costs
Running a small business is always quite challenging and exciting too. It is a combination of working with passion and reality of running a business successfully with a plan.
Some of the bright aspects of running a small business
Such a business gives you an opportunity to be your own boss, and at the same time one can pursue his own dream of changing life.
Even though they are small in size they play a major contribution to the local and national economy. These businesses offer employment to the local population and also work out for charities at local level.
The challenges before small business
The biggest challenge before these businesses is the high fee for credit card. The processing fee for credit card is also known as “merchant fees” which is charged by the credit card companies.
And this fee is considered to be one of the highest in compared to many counterparts of Canada.
The credit card processing fee
Small businesses making a transaction of $10,000 have to pay $200 which is 2% of the processed amount. When compared with countries like Australia and UK this rate is either double or more than double because, in the mentioned countries the companies charge wither 1% or even less than that.
The impact of high credit card fee
- On the Small business owners
If the small business has to pay more then it will have a direct impact on their own profits. This means there is going to be a profit of smaller size. As a result the take home is going to be less, and those who think of reinvesting a major part of the profit into the business itself will also have to suffer. Consequently, t won’t be surprising to hear that a small business is running with a bad credit score.
- On the consumers
The cost of goods and services will go high if the business owners have to pay a high processing fee. Ultimately the consumers will also get burdened up.
The hidden story
There are offers coming rom credit card companies like, “bonus points, reward points” which the consumers enjoy. However, these offers are actually realized from the owners of small businesses by making them pay a high processing fee.
Options to deal with high processing fee
You can opt out of a few choices given below
- You can travel the route of “secured credit card”, wherein you make a security deposit which will help you pay your debt too. You can charge up to the amount of security deposit you make. Some credit card companies Amy also give you a privilege of charring even more than your deposit. Make sure that you clear payments on time so that your credit score does not go down.
- You can also think of suing a “low-limit card” for saving yourself from paying a high processing fee. But then, for using these cards too you will have to initially pay a processing fee and also an annual fee. However, this option helps to build your credit score too.
- You must avoid taking a big loan right after starting your business. This lowers your credit score, so the option is to borrow small amounts so that it does affect your score greatly.
- You can think of offering discounts to people who would be making payments upfront. This will help you maintain a good cash flow to run your business successfully. If you will have enough cash in your hand, you can always pay your bills on time and clear your debts, thereby improving your credit score.
Running a small business could be filled with challenges and making it run with a good score is a good combination of art and science.