Reasons For a Small Business Credit Card
Small businesses in the U.S. are growing faster than ever and continue to be
the backbone of the American economy. To grow and operate efficiently small
businesses need access to all types of capital, and in particular unsecured
credit offered through small business
credit card s. The number one reason for business failures involves insufficient
capital and business credit cards can help smooth out the ups and downs of small
business capital needs. Listed below are greater details on why small businesses
can benefit from a business credit card.
Extending Cash Flow
For businesses that rely on consistent cash flow to pay for supplies or contactors
(such as landscapers, hair salons, interior designers), a business credit card
that can aid in purchasing items from clients before invoicing customers is
ideal. For example, a landscaper may use a credit card at the beginning of the
month to buy materials from a wholesale nursery and then pay it off when the
statement comes, after the customer has paid. This way, money paid out does
not need to come out of the landscaper's cash accounts. If your business falls
under this situation, you should look for a business credit card with high credit
limits and benefits for paying off within 30 days. If your billing cycle to
customers goes longer than 30 days, look for a low interest credit card so it
won't matter if you carry a balance for a month or two.
Flexible Credit Limits
Credit limits for business credit cards come in two varieties – preset by the
credit card company and no-preset. Credit cards with preset limits are usually
fairly generous and normally do not carry an annual fee. Business credit cards
with no-preset spending limits, such as those from American
Express do carry an annual fee but offer the flexibility. If your business
spending is prone to significant spikes due to inventory purchases, for example,
a credit card with no-preset limits can offer welcome flexibility. However,
if you are the type of business that works primarily on a cash basis or that
doesn't need to purchase inventory on a regular basis then a credit card for
periodic or emergency uses would be best. Look for a small business credit card
that offers a moderate credit limit with a low annual percentage rate (APR).
This way, if extra money is needed, it is available for your business and can
be paid out over time.
Business Credit Cards with rewards
Businesses that require frequent travel and/or client entertaining should look
at business credit cards that offer reward benefits. For example, frequent flyer
business credit cards offer benefits both for making charges to their cards
and for flying their airlines. Business spending can also be leveraged to earn
significant cash back or merchandise rewards. Consult with your accountant on
how these benefits can be used for either business or personal use.
Expense Reporting
Maintaining proper records is crucial for small business expense reporting and
profitability analysis. Credit card statements – particularly year end statements
can be invaluable for small businesses to monitor spending by category, report
rewards and simplify tax preparation.
How your business chooses to use credit needs to be discussed between you and
your financial advisor or accountant. Making the right choice when it comes
to a business credit card can help make your business more of a success.
For more information on credit cards and related topics, please see our library of articles.
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Want to read more? Below are articles that should be of interest to you:
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Your financial situation is unique and our information and advice may not be appropriate for your situation. Accordingly, CreditCardXPO.com recommends that you get different opinions and seek the advice of your accountant and other financial advisers who are fully aware of your individual circumstances before making any final decisions or implementing any financial strategy.
