Financing a small business with a credit card

Using a small business credit card to finance your small business is a good idea-to a point. Using a small business credit can improve your credit rating, improve your standing, help you get the supplies that you need, and more. However, financing your entire business with a small business credit card can get you in over your head when it comes to high interest level debt.

There are a number of small business credit cards that are specifically tailored for small business owners. In fact, over two-thirds of small business owners use a small business credit card. Using a small business credit card can be a great idea for your small business, as long as you use it wisely and don't fall into common credit card traps.

Some benefits to using small business credit cards

1. Rewards, rewards, rewards
Because credit card companies are so competitive, they are offering more and more rewards to small business owners who choose to use their cards. Numerous cards offer different reward programs and different benefit and discount programs. Some small business credit cards offer airline miles. Some small business credit cards offer you discounts and points at major retailers such as Costco. Look carefully at the different options and rewards offered by small business credit cards to find the rewards that will suit your situation the most.

2. Don't mix your expenses
Keep your personal credit cards and your business credit cards separate. This separation will make tracking expenses much easier. Also, by keeping your expenses separate, you will avoid a number of serious tax and accounting related problems and issues.

3. Keep track of what you buy
One of the major benefits to using a small business credit card to help with your business finances is that credit cards make it easy for you to track your expenses. Simply ask for an end-of-the-year statement from your credit card company, if it doesn't come automatically. You can see all of your expenses listed on one page, making those year-end business expenditure reports much easier and simpler.

4. Build your credit
Just like in the world of personal and individual credit, a small business credit card will give your business the chance to build greater credit. You will need this small business credit when you apply for loans in order to expand your small business. Having good credit is important when you want to extend your credit line in order to fund even more business enterprises.

5. Control your employees
Another major advantage to using small business credit cards is that you can track the purchases that your employees make with your business credit cards, and you can set the purchasing limits on those credit cards. Setting limits and tracking expenses can help curb abuse and catch misuse of company funds.

6. Limit the number of cards that you have
You might not know that if you have a lot of credit cards, it can actually hurt your credit. Having a large number of credit cards shows possible lenders that you are having trouble paying off your credit bills. Having a large number of small business cards also makes it more difficult for you to keep a handle on your business finances and business expenses.

7. Avoid the Check 21 act
The Check 21 act lets checks be cleared more quickly than they were previously. Because most small business credit cards give you a 21 day grace period before you have to make a payment on any purchase, you can actually improve your small business' cash flow by making purchases with your small business credit card instead of using a check.

8. Don't fall for the cash advance
Even though your small business credit card will send you "free" checks that you can use for a small business cash advance, there are hidden fees behind those free checks and cash advances. The interest rates are higher and also you have to pay more fees. If you need money right away, use your small business' account's credit card.

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Categories: Credit Management,

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