We all know how useful a personal credit card is, and the numerous financial dilemmas it resolves on a day to day basis. But how much more would it benefit a business?
With the constant need for cash to pay bills and keep the business running, every enterprise needs a business credit card. It also provides the convenience of carrying out large value transactions without your having to carry a huge amount of cash or a checkbook.
A business credit card can provide numerous benefits. Here are a few:
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Control of Expenses
A business credit card makes it easy to analyze spending. You can keep tabs of where your money is going and see which employees are spending it. Some credit cards provide purchase protection that provides a cushion from losses to your enterprise. You can use it in case a high-value purchase you make turns out to be damaged or is stolen.
The credit card statement makes it easy to make a more accurate budget. It gives you a clear picture of your monthly recurring expenses as opposed to using receipts that are easy to lose, or bank statements that could be non-descriptive. Accuracy enables better financial planning.
Easier Accounting
Tax compliance is a necessity for any enterprise and failure to comply can lead to penalties. For a small enterprise without full-time accountants, the taxes are usually handled by the owner or a freelance accountant who is paid by the hour.
Using credit card statements makes it easy to round up business expenses. Since the work of rummaging through countless receipts and doing additions is eliminated, a lot of time is saved. The accountant spends fewer hours on the task, so their service cost less.Plus, if you are one of those people who do their taxes personally, you get to save time.
Access to Cash Flow
Whether the business is small or large, the need for money to cover daily operations is ever-present. Low cash flow could result from poor profits or unpaid invoices. In either case, activities do not have to stall.
A business credit card ensures that inadequate cash does not cause you to miss out on opportunities such as workshops. It ensures that you do not delay purchasing or repairing equipment needed for production due to low cash availability.
Rewards
Business credit cards, like personal credit cards, provide rewards, points, and cash back. For instance, travel rewards could help you cut your business travel expenses. It could provide discounts on tickets and hotel accommodation. The sign-up bonuses that go as high as $1,000 could save you some money as well.
Your employees will get free credit cards for business use, but this does not apply to all providers. More cards mean more avenues to accumulate rewards. Different credit cards offer different types of rewards, so do adequate research to apply for one with the best rewards.
Builds a Credit Card History
Although most small enterprise owners prefer financing their business using a personal credit card, giving your startup financial independence is beneficial. The earlier you begin molding your credit history, the better. A good credit history gives your business a high credit score that attracts better rates when applying for a business loan or asset financing.
Maintain a low balance by making frequent payments improves your rating. A good business credit score does not just give your company credibility with lenders, but other companies that desire to work with you may gain confidence in the enterprise. The rating shows that you are likely to pay invoices on time.
Less Risk on Your Personal Credit Report
Business expenditures are at most times large and charging these expenses to your personal credit card could damage your rating. It could make it hard for you to qualify for nation 21 loans, mortgages, and auto loans.
Getting a card for your enterprise ensures that the business’s utilization ratio does not reflect in your personal credit report. However, this depends on the card you choose. If you personally guaranteed the business credit card, some providers will report any activity in this card to both a consumer and commercial credit bureau.It could affect your rating.
Friendlier Terms and Perks
Since enterprises make more money and have higher expenses, you can expect a higher credit limit on a business credit card. It provides a higher spending power and you can easily make purchases that can help your venture grow despite your financial position.
Some card providers make it possible to extend the billing cycle at no interest, and they also offer discounts for early payment. Other cards make it possible to consolidate the rewards from multiple credit cards.
When choosing a provider, compare the advantages across different companies and check the perks that could be most beneficial.
Access to Tools that Help in Business Growth
Every entrepreneur is always looking for more efficient ways to run their business. Some business credit card providers offer extra products to satisfy this need. They come with detailed reporting and expense management tools to help you properly manage the expenditure.
Other companies provide a mobile checkout with their products. This is a convenient way to accept payments wherever you are. Such a tool is convenient for startups and freelancers who are yet to establish a physical store.
Access to More Credit Products
Acquiring a business loan for a startup can be hard. Most commercial banks will be wary, especially if the startup is yet to stabilize or have a substantial credit history. Inability to obtain credit hinders growth.
If your enterprise has a difficult time accessing loans, choose a business credit card provider that offers other credit products. You can then build a strong financial relationship and develop trust by making timely payments. This will make it possible to access a variety of credit lines that go beyond the credit card, and through these funds, the business will grow.
Separates Business and Personal Expenses
Spending funds on personal needs using your business credit card or using your personal credit card to pay for business expenditure is never a good idea. It makes it hard to assess how much money your enterprise is making. With a business credit card, a glance at the statement and then comparing it to the income can give you an idea of where the enterprise stands.
If the company is a limited liability, you can lose the protection from liability if there is proof that you mixed personal finances with company finances. This is known as piercing the corporate veil. Losing protection makes you liable for company debts.
Keeping personal and company expenditure separate is also important for audits purposes.
Bottom Line
There are many companies that offer business credit cards. Ensure your provider offers tools, products, and rewards relevant to your needs as an enterprise.
A business credit card will help you keep track of your overheads while separating personal and business expenditure. It will provide a supply of cash for emergencies, improve your business’s credit score, and make filing taxes easier and more accurate.
Despite the financial flexibility that comes with having a business credit card, be sure to control your expenses.This will prevent high interest and reduce the risk of default.
