Get a Small Business Credit Card

The bottom line is that credit cards have now replaced your regular unsecured, personal line of credit. Most people work under the assumption that banks will lend them money if their business is flourishing. However in reality, there is no bank that will lend you money without some sort of collateral. Even lenders will only loan money to a borrower who has some capital. Even something that is as ‘safe’ as commercial real estate would require at least a 20 percent down payment. It is indeed very difficult to get a loan for a commercial business, even if your business is established.

If you are running a business or have recently started a small business set up, it is advisable to get as much credit as possible on your credit cards – but do this at a reasonable rate, because getting too much credit will surely make your credit score fall.

Advantages of Small Business Credit Cards

Here are a few ways in which your small business credit card can benefit you:

• Extends Cash Flow – For small businesses that are heavily dependent on a steady cash flow to pay for a number of things like contractors and supplies, a small business credit card can help by purchasing items for certain clients before the customers invoicing is done. In this way, the money that is given out doesn’t necessarily need to come out of your businesses accounts. If your business falls under a situation wherein you can pay off debts within a certain amount of time, then go for small business credit cards that have high credit limits and offer benefits if you pay within 30 days. If on the other hand, the bills are paid to the customer after 30 days, then look for a business credit card with a low rate of interest, as it wont really matter whether you carry some amount of balance for a month or so.
• Small business credit cards with rewards – If your business requires you to do a lot of traveling or indulge in entertaining your clients, then opt for small business credit cards that benefits and rewards. For instance, frequent travelers have frequent flier business credit cards that provide benefits every time they fly their airlines or make charges to their cards. Spending on your business can also be leveraged in such a way to earn considerable amounts of merchandise rewards and cash back offers. So, go ahead and consult with your accountant on how you can use these credit cards to your advantage, either for business use or personal use.
• Flexible Credit limits – There are two varieties of credit limits for small business credit cards, namely preset and no preset. Credit cards having preset limits tend to be more generous with those limits and don’t usually carry any annual fee. On the other hand, small business credit cards with no preset limits, like American Express, tend to carry annual fees but are more flexible. So, if your business finances are more prone to spikes because of frequent purchases, then a business credit card with no preset limits will offer more flexibility. If however, your business works mainly on a cash basis or doesn’t really need a purchase inventory every now and then, a small business credit card for emergency uses would be the best bet. Look for small business credit cards that offer a reasonable credit limit with a low APR or annual percentage rate. If more money is required, it will be available for your business and can be paid over a period of time.
• Increased safety – small business credit cards indeed make a lot more sense when you require services or supplies over the Internet. Even though you could probably use a debit card for these transactions, it is a lot safer to use a small business credit card since you will be able to contest any charges if at all you don’t receive the service or product that you were expecting. Small business credit cards have no liability for unauthorized charges, so if at all your credit card information does happen to fall into the hands of the wrong person, you will always be protected.

It is also worth noting that these small business credit cards are not beneficial to anyone and everyone. Most business owners don’t have very good financial situations, and a business credit card would probably dig a deeper hole for them within no time at all. If you cant completely pay off your credit card every month, then you are in big trouble. If you are going through this with small business credit cards, then they are not working for you and you need to get rid of them.

How you and your business chooses to use these small business credit cards should be discussed between you, the owner, and your accountant or financial adviser. By making just the right choices when getting a small business credit card, you can turn your small business into a raging success!