What a Business Credit Card Can Do for You

Monday, November 29, 2021

As a business owner, managing your cash flow is probably one of your biggest priorities. Many business owners find that they need extra cash to cover both unexpected and planned expenses. Whether you’re waiting for a customer invoice to clear or are experiencing a slow period, a business credit card can help cover expenses while you wait for funds to come in.

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WHAT ARE BUSINESS CREDIT CARDS?

Business credit cards work almost exactly the same as personal credit cards. However, business credit cards often offer rewards, interest rates and exclusive offers designed especially for small businesses.

Like any credit card, this card serves as a revolving line of credit for your business. Think of it as a loan to your business that can be used over and over again. You’ll be given a credit limit, which is the maximum amount you’re able to borrow for purchases on the credit card. When you pay off your bill, you’ll get access to that credit again.

For example, your business needs new equipment that costs $1,000 and you make the purchase on your business credit card, which has a credit limit of $5,000. After buying the equipment, your credit limit drops to $4,000. However, when you pay off the $1,000 for the equipment, you have access to the full $5,000 again.

BENEFITS OF BUSINESS CREDIT CARDS

Business credit cards do more than help you pay for business needs. They often come with perks that can make managing your business finances easier, such as:

  • Easily Record Expenses: When you use a personal credit card or checking account for business expenses, it can be difficult to separate your business and personal financial records. Using a business credit card for all of your business expenses gives you an easy to read — and easy to find — report of your spending. You can use monthly statements to see what you’ve spent your money on and where. This information is vital when listing business expenses at tax time.

  • Earn Rewards: Some business credit cards earn you rewards with your purchases. You can usually redeem these rewards, like points, for business needs. For example, you might be able to redeem rewards for travel vouchers for your next business trip.

  • Build Business Credit: Did you know your business has its own credit score? Just like your personal credit score, your business credit score can help you access funding such as business loans. Business credit cards are one of the easiest ways to build your business credit, because they’re often easier to qualify for than other types of financing.

  • Access Flexible Financing: A business credit card can give your business access to flexible financing that can be used when you need it most. Other types of financing, like business loans, require monthly payments whether you need the money at the time or not. With a credit card, you’ll only pay when you use the card to make purchases.

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GETTING A CREDIT CARD FOR YOUR BUSINESS

Are you on the fence about whether a business credit card is right for your business? You might find other financing options, like a business loan or line of credit, make more sense for your small business. However, getting a credit card could be a good backup source of financing if you find yourself in need of working capital quickly. A business banker can help you better understand your business financing needs, including credit card options. Before applying for a new credit card, make sure your financial information is organized and you’re ready to apply. This could mean collecting profit and loss statements to help prove your business is profitable (and will be able to make credit card payments).

APPLY FOR A CREDIT CARD



Nothing contained in this material is intended to constitute legal, tax, securities or investment advice, nor an opinion that it is appropriate for readers. The information that is contained in this material is general nature. Readers should seek professional advice for their respective situations.

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