How To Manage Your Small Business Credit Cards Efficiently

If your small business is just starting up or is generally new, you have only just begun researching the option to use business credit cards. There are benefits and disadvantages to using business credit cards, and good credit will be an ever-important factor.

If you haven't yet obtained a business credit card, or your business is new and you haven't managed to build sufficient business credit or a history of paying suppliers, you will face your first obstacle. To apply for a business credit card, you may be asked to personally guarantee the loan. This is where your good credit will count the most. While this is also usually just a small formality, banks have become somewhat tougher in handing out business credit loans due to the economy.

Additionally, until you are able to build a good, solid business credit rating, your business credit card will continue to be associated with your personal credit history. Despite this, you will not be afforded the same protection by the banks as you would if you were merely a consumer. Business credit cards carry more risk than personal credit cards, so your account should be monitored closely.

With this in mind, you might be asking yourself why you would choose to have a business credit card rather than simply use a personal credit card. Keeping the two separate will help eliminate financial troubles and confusion, and also appears to make your business more legitimate in the eyes of creditors, merchants and suppliers.

Benefits and Advantages of Small Business Credit Cards

As stated above, keeping business expenses separate from personal expenses avoids confusion in your finances, and also makes it easier to handle your taxes. It is also beneficial to appear as a professional, legitimate business before the IRS.

With all your business expenses associated with one business account, tracking expenses and handling your accounting is much easier, especially since most credit card companies can provide you with a year-end summary of all your transactions. Better organization leads to better management.

One of the most important benefits of using a business credit card is that it will allow you to build business credit, making it easier for you to acquire additional capital in the future should your company need to expand.

With so much competition, many business credit cards also offer the user specific rewards, such as discounts on travel, rewards of office supplies, savings on software, and many other promotional incentives. For a new business, choosing the right credit card with the right rewards can lead to much-needed additional savings.

Most small business credit cards also allow you to provide additional cards for employees that are linked to the same account. This is useful if you have the need for employees to make purchases, and you can also place a spending limit on individual cards to ensure employee spending does not get out of hand.

Managing Your Small Business Credit Card

A small business credit card should not be considered a license to spend. While you may use it often to purchase items and supplies necessary for your business, it should be utilized mainly to manage your cash flow. Try to keep long-term funding needs in mind to better control your budgeting. Additionally, use alternative methods of payment sometimes if they are available, as business credit cards typically carry a higher interest rate than personal credit cards.

As a further precaution and to ensure increased management efficiency, be certain to use your business credit card only for business purposes. This enables you to track expenses more easily, and avoids the risk of personal liability.

If you already have an existing personal banking relationship with a bank or lending institution, than you might want to consider applying for your business credit card there as well. An existing relationship can help facilitate the process and may work better in your favor rather than a bank that simply uses an automated scoring system if they have never seen you before.

Try to limit yourself to a single business credit card. Using multiple cards can lead to financial problems and often has a negative impact on your overall credit rating. It is also easier to make a single payment rather than attempting to make multiple payments throughout the month. Additionally, when making payments, save a bit of time and money by paying online.

Avoid using your credit card for cash advances if possible. Receiving a cash advance from your credit card often means additional fees. Likewise, late payments should be avoided at all costs. A late payment will not only incur fees, it may also cause your interest rate to rise, and may negatively impact your credit rating.

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