With a business credit card you can begin to establish a credit file for your business rather than have business expenses (or problems) intermingled with your personal credit rating. The business cards work much the same as personal lines of credit.
These cards are often opened in the name of your company and have more flexibility in your credit limit if your company is well established. If yours is a start-up without a track record as yet establishing credit for the business is a critical step to take.
The APR
Annual Percentage Rate (APR) charged for business credit cards average one to two percent lower than that of personal credit accounts. Some lenders offer extra incentives to lure commerce accounts. This is an unethical strategy but it is not illegal.
Make sure to take your time and compare the various offers before making your decision. On that way, you will be able to decide what suits your needs best instead of being stuck with a credit card that you don’t need.
Perhaps the biggest value of a business credit card lies in the organized accounting it provides. Many store owners hire accountants to keep records of expenses for tax and management purposes.
This is a heavy expense for a small business and part of the cost is the hours spent by the accountant separating business expenses from your personal charges.
With a business credit card all of the purchases are listed in one place and can easily be organized by type of purchase.
The amount saved in paying extra hourly fees to accountants to sort out your business transactions from personal purchases will probably repay a large portion of any fees or interest on that credit account.
Many financial institutions even provide the monthly bill in a downloadable form that allows you to import the charges directly into accounting software on your computer. With that benefit you may only need your accountant for quarterly tax filings.
Maximize The Benefits
To maximize the benefits of a credit card dedicated to your business it’s important to use it for as much of your purchasing as possible.
Charge your office supplies, your business travel, the meals you buy to entertain clients. Keep all of your receipts, of course, even if you only dump them into a basket each day.
That quick method of “filing” will be good enough as you can match the receipts to your credit card bill when it arrives each month.
Is it important to note that if you are getting a card for a new business you may be required to guarantee that card by accepting personal liability for the account. The failure rate for new small business start-ups is high and lenders know this.
Negotiating With The Banks
Once your business is established and profitable you should be able to negotiate with the bank issuing your business credit account and removed the personal liability clause.
Just don’t be surprised to find that liability required until your business has established its own good credit file.
Small business owners are sometimes reluctant to open lines of credit for daily expenses. After using a business credit card for a few months, they will wonder how they kept records without that account. Those who keep their own financial records will love the simplicity.
If you use an accountant you will only need to drop off the bill and receipts once a month for him to match and record.
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Summary
A business credit card simplifies purchases and record keeping and does more than any one office program to keep your business organized. That little card is worth its weight in gold to small companies.
