Does It Make Sense to Use Business Credit Cards?

June 28, 2012 by  Filed under: Credit 

As a small business owner, you might consider the benefits of using business credit cards to make purchases on behalf of your business. You might be hesitant about applying for and using business credit cards if you’ve ever experienced financial problems due to overspending with credit cards in the past.

Does it ever make sense to use business credit cards to finance a purchase or start a new business?

Advantages of Business Credit Cards

Credit cards for business use provide additional cash flow to your company even when you don’t have the cash available at that exact moment. There are many reasons why a business owner may not have accessible cash flow when a purchase needs to be made, but that doesn’t necessarily mean the business is struggling financially. Sometimes cash may be tied up, or you are waiting for invoices to be paid, but your sales are consistent and you have no fears over the long term success of your company. If this describes your business finances, it may make sense to use business cards to continue making purchases or payments as needed during a temporary time of reduced cash flow.

Some businesses rely on cards to make all of their purchases and payments, because it provides them with additional purchase protection that cash or check payments do not offer. Many cards include extended warranties and payment protection at no additional cost. Provided you make your payments on time and avoid carrying a balance from month to month, it is wise to use a business card to receive additional purchase protection and extended warranties on the items you buy.

If you are using a business rewards card, you may benefit from earning cash back, travel rewards, or merchandise. If you can get something extra for spending money you have to spend anyway, it can be a good use of your money to put purchases on a rewards card in order to increase what you get from your regular business spending. Just be sure the rewards card isn’t charging fees that cost you more than the rewards you earn to ensure it is worthwhile.

Should You Finance a Business Start Up With a Credit Card?

In these challenging economic times, it is extremely difficult to obtain funding through traditional sources to start a business. Banks are denying many business loans because of the risk for business failure and the borrowers’ potential inability to repay the loan. If you have reasonable credit, you can often get a credit card even if you are unable to get a loan from the bank. Using a single credit card for all of your business related expenses can help you keep track of your startup expenses, and give you access to funds to buy inventory or equipment you need to get your business started. Provided you can keep up with your monthly credit payments until your business is turning a profit, using a business card to fund your new business may be a viable option.

If you decide to use business credit to finance the costs associated with starting a new business, make sure you have a plan in place, or the financial ability to repay the card yourself if the business fails to make a profit.

Debra Lee Dragon is a freelance writer providing content for a site that helps consumers find the best business credit cards and balance transfer offers. Find and apply for a credit card that best meets your needs, today!

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