According to the Tower Group, up to two-thirds of entrepreneurs use small-business credit cards to keep their businesses going.
Credit cards can help your business thrive by enabling it to make large purchases, or keep operations moving during slow periods of little income.
Business credit cards can also help protect and improve your business’s relationships by extending benefits to your bank, your employees, your accountant, and your family.
Your Relationship with Your Bank
Acquiring a business credit card is easier than getting a bank loan, especially in the early stages of your company’s startup. It can improve your relationship with your bank by:
- Establishing your business’s credit history (separate from your personal credit history). Having a positive credit history makes you more likely to get a loan in the future, especially if you keep all your business at a single bank.
- The use of your business credit card – particularly the pattern of purchases and payments – demonstrates your business growth over time and gives you more credibility.
Your Relationship with Your Employees
Issue individual cards to your employees that are linked to the business account so that they can easily make business-related purchases on the go. A card is vastly more convenient for your employees, since they won’t need your prior authorization or signature in order to make the purchases they need.
- Employee cards build an element of trust between you and your employees. Business credit cards also give them access to perks like airport lounge memberships, concierge services, etc.
- Rather than relying on receipts and expense reports, your itemized card statements let you keep track of each employee’s exact expenses, catch big spenders and fraudulent or inappropriate purchases.
- Business credit cards offer many more options than personal cards, including: employee misuse insurance, travel insurance, auto rental insurance, and identity theft coverage. These can all help to protect yourself and your employees from accidents and fraud.
Your Relationship with Your Accountant
Credit cards help you and your employees make purchases quickly and easily. They’re easy to use, and the transactions appear on your statement immediately – no waiting for checks to clear or post to your account, making your accountant’s job much easier.
- Your expenses are all itemized on quarterly and annual statements, so you don’t have to keep receipts in order to track your finances. Your business accountant can simply print off your statements to find out how every dollar was used.
Your Relationship with Your Family
The danger of starting a small business is that if it fails, it can negatively impact your personal finances, even as far as making you lose your home to collectors. Business credit cards can protect you and your family from the vagaries of the economy and the dangers of business failure.
- Your business’s credit has no effect on your personal credit, so business transactions won’t impact your personal credit rating. Be sure to limit the amount of personal credit you use to establish your business, and get a business credit card as early in the process as you can.
- Different cards helps keep your personal and business transactions separate, making balancing the books easier both at home and at work.
As with any credit card, it’s important to spend wisely with your business credit card. Missed payments can harm your business’s credit, and high balances and interest fees can cost you money in the long run. So long as you are responsible in its use, a business credit card can help your business maintain and strengthen all of the relationships it depends on.
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