Researchers say business credit cards are the money-management tool of choice for 66 percent of small businesses in the United States. Improved cash flow, building a credit history, controlling spending and usage rewards number among the main advantages of using a credit card for business spending.

Cash Flow Advantages

Once approved for a business credit card, the business owner has created a line of credit to be used anytime for any legitimate business purpose. If collection on receivables runs slow and supply needs grow, a business credit card can fund the difference. Depending on the credit limit, a small business can use the business credit card to fund equipment purchases, pay shipping costs, cover bills and more. All of this is done without touching cash or calling a lender.

Building Credit History

As businesses grow, the need for credit grows. However, small businesses often face the challenge of qualifying for needed credit. A business credit card’s relatively easy qualifcation process allows the business owner to use a credit instrument and begin establishing a good credit history.

Of course, it’s essential that the payments for the business credit card are on time and that the credit limit isn’t exceeded. The benefit of a business credit card can quickly turn into a disadvantage otherwise.

Spending Controls

With a business credit card or cards, a business owner can give employees the freedom to spend what is necessary to do their job, and the business owner can do so with safeguards in place to keep spending from getting out of control.

All credit cards have borrowing limits. However, if a small business owner gives cards to members of the sales force, as an example, spending limits can be set for each card so that no individual can jeopardize the business’s ability to meet the card payments.

Additionally, spending on a business credit card is tracked by the card issuer, so the business owner can clearly see how the firm’s money is being spent.

This benefit expands to all of the business’s bookkeeping needs. Many card issuers provide spending tracking that breaks business spending into various categories and accounts. Spending on the business credit card comes with data already sorted to make accounting easier.

Card Rewards

Choose the right business credit card, and the firm can benefit from any number of usage rewards. To name a few, these rewards can include:

    * cash back at the end of the year based on the volume of spending;
    * points toward the purchase of air travel and hotel and vehicle rental, which can be used to reduce future business travel costs or as employee incentives; and
    * discounts on products and services.

In choosing a business credit card, business owners need to consider the annual fee, if any; the interest rate for balances carried forward; whether there is a fee for paying off the balance in full each month; and any fees or penalties associated with late payments. But the right business credit card offers a great deal of financial flexibility and control.

Did you find this article helpful?

Compare Credit Cards

Business Credit Cards