Money may not be the answer to all of life’s problems, but it surely helps businesses. This is especially true for small businesses. However, this is not to say that big firms don’t benefit from it at all.
Having enough liquid capital allows your organization, big or small, to remain flexible in the ever-changing market. You can meet demands while also making long-term investments.
Most business owners wonder if they should get a business credit card. If you’re at this point in your business journey, you need to read this article first before deciding. The following are some of the benefits of using a business credit card that helps build your firm.
- Improves Your Credit Rating and Score
When it comes to credit, a startup starts with a clean slate. While that sounds positive, it’s not beneficial at all. Lenders don’t know what to think of you because you don’t have a credit history to look at. They have no idea whether you can repay a loan. And, it will be more difficult to get finance.
A company credit card is beneficial for startup companies. By using it regularly and paying on time, your credit score or rating will improve over time. You can even achieve the perfect credit score possible.
The highest business FICO credit score is 300, but a 140 score is good enough. With a good credit score, you can get cheaper interest rates and better trade credit. It also means you can have access to the financial resources that your company needs.
There’s no better way to get started if you want to qualify for long-term loans in the future.
- Increases Financing
Personal credit cards are designed to cater to individuals’ spending preferences. It typically has lower spending quantities. This credit limit isn’t enough for many firms. Inventory purchases on a weekly or monthly basis can quickly deplete available finances.
To account for regular corporate expenses, business credit cards have greater spending limits. Taking care of periodic purchases isn’t a problem when you have access to $30,000–$50,000. Furthermore, longer interest-free repayment durations are available with this sort of business financing.
This longer grace period gives you more flexibility to invest in your company.
- Improves Cash Flow
Business cash flow is a part of doing business. Investors and banks prefer to see continued profitability and expansion. Here are ways that business credit helps you grow your business:
- Inventory purchases: A credit card guarantees you have exactly what you need whenever you need it. It can be for purchases of raw materials or physical inventory. You can also purchase larger quantities to get better supplier pricing brackets. And this is due to increased spending limits.
- Cyclical expenses: Business expenses are not the same every month. This is particularly true for businesses that cope with seasonal changes. However, they still need to deal with annual expenses such as taxes and insurance fees. Credit cards are a great way to pay for such things.
- Unexpected emergencies: Being prepared for business emergencies is a smart idea. It’s relieving to know that you have a buffer to keep the lights on no matter what happens. It also allows your firm to deal with the unexpected without any problems.
- Manages Employee Expenses
Reimbursing your employees for business expenses on personal cards can be a pain. That’s why getting a business card is the best way to streamline the process.
You can have your employees use the card for any business expenses. In return, you’ll have a single monthly bill that has all of your company’s expenses. Furthermore, several card issuers offer complimentary employee cards.
- Provides Rewards Specifically for Businesses
Personal credit cards come with incentives like miles that can be redeemed for free flights. How do the various business alternatives compare? They often go above and beyond what other types of credit cards offer.
Business credit cards can provide greater travel benefits and more miles. Additionally, you can also get higher cash-back percentages or more appealing signup incentives. The reason is that business owners spend more money on a monthly basis than regular people.
These bonuses are tailored to your company’s needs, and that makes them even more appealing. It’s not difficult to discover a credit card that offers outstanding airfare benefits. Especially if your business operations include going internationally to meet with people.
Monthly cashback bonuses based on total purchases provide extra capital to invest back into the firm. This is a better option for owners who don’t need to earn travel miles or hotel points.
- Allows for Travel and Purchase Protection
Business credit cards offer a variety of travel and transaction coverage. This includes:
- No foreign transaction costs
- Mobile phone protection
- Purchase and extended warranty protection
- Vacation cancellation or interruption insurance, and
- Auto rental damage collision waivers
- Separates Your Personal and Business Expenses
Business credit cards help you keep your business and personal transactions separated. Here are some of the advantages of having a separated business credit card:
- Limits your personal liability for business expenses. One of the requirements in running a business as a separate entity is having separate finances. You can achieve thi by applying for a business credit card.
- Makes accounting easier. Having a business credit card statement to look at helps you keep track of expenses much easier. This can also assist you in deducting business-related expenses during tax season.
- Lessens the impact of your personal credit: Having a good business credit history helps you secure the funding your business needs. The reason is that it minimizes the impact of your personal credit score when applying for loans. Even if you have late payments for your business card, this will not impact your personal credit score.
- Allows Access to More Credit Cards
Some banks have a limit on how many cards you can open in a certain period of time. For example, with American Express, you can only have 5 credit cards active at a time.
With business credit cards, such restrictions do not exist. And this gives you the opportunity to expand your credit card portfolio. This means you’ll be able to apply for more cards. Ultimately, you can receive more benefits and have a higher credit limit.
Conclusion
When compared to paying with cash or check, using a business credit card is more beneficial. The best business credit card for your company is determined by different factors. You need to take into account your company size, priorities, and the credit limit you need.
Additionally, you need to know the perks you can get when you apply for a credit card. This includes spending limit, purchase protection, online account access, incentives, annual fee, and interest rates.
Applying for a credit card is one of the ideal ways for your company to succeed. Small businesses and startup companies greatly benefit from a business credit card.
