If you are the owner of a small business, you probably know the importance of running a tight ship, keeping on top of your finances and ensuring that cash flow is good.
One way of helping you keep track of your expenses and pay for multiple items in one convenient way is to use a business credit card. The more you use a business credit card wisely, the quicker you will develop a good idea on what to buy and what not to buy with your card to meet the financial objectives of your business.
Weighing the Benefits of Business Credit Cards
As with any financial option, there are benefits you should consider, which you will then need to compare to any potential negatives, so you can decide which way to go. Choosing a business card with rewards has a number of benefits attached, so it is worth looking at those first of all.
Using a business card can be an easier way of separating your business and personal expenses. The purchase histories you get when using a credit card can help you produce more accurate records when you have to file returns or provide more information.
Using your business card can also smooth out the cash flow of the business, as it gives you time to settle your bills. If you can settle your credit card account within the prescribed time period, and then pay the card down each month, you can avoid incurring borrowing costs. This can be a boost for your business and help bridge the gaps that can sometimes occur between your monthly payables and receivables.
You might find that some business cards charge an annual fee, but if you weigh the benefits they offer, it could be worth paying the fee to access some of the rewards and general flexibility a card might be able to offer you.
You and Your Business are Inextricably Linked
As a small business owner, you need to understand when applying for a credit card in your company name, the terms of the agreement may spell out that you will be personally on the hook if your business doesn’t settle the bill.
The fact that you and your business are inextricably linked, will also have an influence on your application process and acceptance for the card in the first place. This is a key consideration when a financial institution is assessing your application.
You will find that a good number of card issuers will expect you to have a decent credit score in your own right to qualify for a business credit card. Even if you have a strong business track record, but have had some issues with your personal credit history, it could be an issue.
If you have a good credit score personally, this is significant in terms of gaining access to a business card via a successful application. It also means you need to be aware of what happens with the business and understand that any balances it runs up will ultimately be up to you, and recorded as such on your credit file.
It is always worth understanding this aspect of a business credit card, just so that you know exactly what you are signing up for when you apply for one. If you are confident that you can fully support the debt, there is no reason to not consider applying for a business credit card, especially when you can make good on some of the benefits it can bring you.
Top Factors for Finding the Right Card for You
Here are several key points to look out for when trying to decide which business credit card is right for you:
- Ignore the Introductory APR: It is a bad idea to allow yourself to be dazzled by an introductory low annual percentage rate (APR), especially if that rate is only good for a few months before rising to a much higher level than that of its rivals. Obviously that APR might be irrelevant if you are going to clear the balance every time the statement is due, but if you do have to leave a balance on your card for a short while, the interest rate they charge becomes important.
- Consider Your Spending Habits: Try to find a card that is in tune with your spending habits. If you travel a lot and like the idea of accumulating rewards that you can use towards flights and hotels, that is a key feature to look for in a card. Credit card deals that offer cash back on certain purchases, especially ones you would have made either way in the normal course of business, should also appeal to you when shopping for a business credit card.
The main thing to remember is that more often than not, a business credit card delivers a convenient way to organize your spending. It can also potentially save a few headaches when you are doing your taxes. You could also benefit from some of the rewards and cash back offers that are available, especially if you do your homework before choosing your business credit card.
About Zachary Cook
Zachary Cook runs a small business which he started from his spare bedroom before eventually being able to move to larger premises as business took off. He writes articles that other small business owners can learn from.
Join thousands of subscribers
And get updates as and when we publish new, informative and research based posts!