Small business credit cards provide an easy way to finance day to day business activities, and can even be used to start a new business. More and more small business owners rely on credit cards nowadays for things like purchasing supplies, gas, meals, start-up capital and more.
Small business credit cards are easier to acquire than other means of financing such as a bank loan or SBA (Small Business Administration) loan, or even a business line of credit for that matter. You can apply for business credit cards in person at your bank or credit union, you can apply by mail, over the phone and even online.
Your credit limit will be determined by your credit score which takes many factors into account, such as your income level, your current financial obligations and any history of late payment or non-payment. Business credit cards typically offer larger limits than personal credit cards.
For example, my personal credit score is in the mid 700′s and I have an income of just over $100,000 a year. While my personal Visa and Mastercard accounts range from $5,000 – $10,000 limit accounts, my business credit card limit is three times that. Since opening the account many years ago the limit has steadily been increased by my bank, without request from me, and now resides at $29,000. Of course I always make payments on time and always more than the minimum due.
Your business “plastic” can be printed with your name, your business name or both. If your business has employees, many credit card providers will also offer to issue separate cards for employees as well. This can simplify your company’s employee expense account management, as most small business credit card accounts come with excellent reporting tools. Quarterly as well as annual reports are usually broken down by credit card user as well as types of purchases.
Many card issuers also offer online reporting with downloadable files for your spreadsheet software. Just remember to keep a close eye on reports so you know how much each employee is spending monthly, and exactly what the’re spending it on.
Once more advantage to using this type of funding for your business is that the financing is unsecured. In other words, you are not required to guarantee the financing by backing it with personal or business assets such as real estate, securities, etc. This not only speeds the approval process making it a faster way to borrow money, it also makes it easier for people with a less than perfect credit history or a lack of assets to get access to cash.
When shopping for a credit card company to service your small business needs, pay close attention to the APR, or annual percentage rates being offered. Many companies now offer promotional and low introductory rates such as zero percent, but these 0% offers sometimes expire within a few months and you’re left paying rates has high as 18% or more.
If you have a decent credit score and you can do a little shopping around online, you should be able to find a rate that is in the low teens such as the 12% APR I pay on my business card, which also pays bonus rewards points. I also pay a $75 annual fee which many rewards cards come loaded with. However, if you’re not concerned with rewards points or frequent flier miles you should be able to find a credit card with a much lower APR and no annual fee.
If you decide to use credit cards in your small business, try your best to pay off the entire balance each month. This is how you can avoid finance charges and keep expenses down. Unfortunately, credit card interest is no longer tax deductible so you will not be able to write off these expenses. However nearly all charges made with with the credit card will be tax deductible expenses, and your monthly and annual reports will help you come tax time.
Small business credit cards are just one tool every company needs at their disposal, whether you are a sole proprietor, LLC or corporation. There are many cards available from Visa, MasterCard, Discover and American Express with a low interest APR and easy application process. Business plastic can be dangerous if you don’t manage it carefully, however if you keep a close eye on usage they can offer a great, low monthly payment financing solution with generous account limits. The availability of fast cash anytime you need it can really help a new or growing small business with their financial needs.