Running a small business can involve making many financial transactions and therefore keeping track of expenses, running costs and finances can be a time-consuming and challenging task. Credit cards for small businesses are on the rise and around 67% of small businesses use a business credit card.
A small business credit card can be a valuable tool. It will not only make streamlining day-to-day business expenses easier and faster, it is a great way to increase the purchasing power of your business, build your business’s credit history, and enjoy added perks and rewards.
“Business credit cards are one of the most useful and efficient tools available to small business owners. With the right card, and with payments managed effectively, small businesses can benefit from flexible borrowing options, boosting their company’s credit score, as well as having access to perks and rewards that will help your business grow,” says Damian Brychcy, COO and US MD of Capital on Tap.
This guide outlines the top 10 benefits of using a small business card to help you make a decision about which option could be best for your company.
1. Improving cash flow
Many new small business owners start out operating on a tight budget. A business credit card provides a line of credit that enables you to make essential business purchases, such as equipment supplies or inventory stock, even if you don’t have the cash immediately available. Using a business credit card and having access to an instant line of credit can even out your cash flow, making your business able to fulfill orders and operate at maximum efficiency all the time.
2 Building your business credit rating
Just as with individuals, small businesses should aim to build their credit rating as quickly as possible. Using a business credit card, and paying off its balance in full every month, will quickly help you to build a stellar credit rating for your business and boost your credit score. This is important as it improves the credibility of your business and will help to secure better interests and deals on future loans; last year, 36% of small businesses that applied for a loan were denied at least some funding because of their credit score.
3 Keeping personal and business finances separate
If you’re a small business owner, having a separate business credit card is a great and easy way to keep all of your personal and business finances entirely separate. Not only does this save time on a monthly basis when it comes to tracking personal and business-related expenditures, but it’s also more convenient for record-keeping purposes, particularly when completing tax returns.
4 Business rewards and benefits
From higher cashback percentages, more air miles, travel rewards, and a wider range of loyalty-point rewards, business credit cards often offer better sign-up bonuses and perks than personal credit cards. Many business credit cards operate rewards programs where you can earn cashback, travel points, gift cards, or miles for all purchases made on a business credit card.
5 Higher credit limits
Often, business credit cards offer significantly higher spending or credit limits than personal credit cards because they take more factors, including business revenue, personal income, and your current credit score, into account. This higher limit can be invaluable to your business as it enables you to make big business purchases and is a great way to give your company short-term financing options.
6 Control over employee spending
Giving employees a company credit card enables small business owners to keep tabs on exactly what they’re buying, how much they’re spending, and where the majority of business expenses are going. Some business credit cards also offer spending limits for employee card holders, enabling you to have more stringent control and increased oversight of employee expenditure.
7 Tracking cashflow
Using a business credit card means that all business receipts, costs, and expenses are in one place, on one statement. This gives small business owners greater oversight and improved transparency on their company’s finances, including items like inventory purchases, cyclical expenses, and unexpected emergency costs. This can be extremely helpful in maintaining a positive cash flow and having even more control over your business’s financial operations.
8 Purchase protection
Similar to personal credit cards, business credit cards have purchase protection. This means you can dispute any improper or fraudulent charges on your credit card, and you can avoid making any payment on these types of charges until the dispute is resolved. In addition, many business credit cards also offer some form of purchase protection in the event that goods you purchase are lost, stolen, or go missing in transit.
9 Easier than getting a business loan
The process for applying for and obtaining a small business credit card is much faster and easier than securing a small business bank loan. Business loans can be difficult to qualify for and some lenders require significant collateral, a minimum number of years of tax returns, and an extremely established business credit history and score. This can make securing a loan challenging, as opposed to the much easier and more convenient option of applying for a business credit card.
10 Convenience
A business credit card is a convenient and easy way to manage your business’s expenses and purchasing power. From making online orders to being able to give your employees business cards for work-related expenditures and being able to track all expenses in one place, a business credit card is a convenient tool in running your day-to-day business operations.
Summary
Business credit cards can be incredibly helpful and have a number of benefits for small business owners including flexibility, tracking expenses more easily, greater convenience, tighter control over employee spending, and the benefits of rewards and perks.
However, before making a decision about which credit card is best for your business, it’s important to do your due diligence and be thorough when comparing different options. Make sure to consider factors including interest rates, foreign transaction fees, annual fees, application processes, and whether the rewards and benefits suit your business needs.
