Here’s a typical question(s): I have a personal credit card – I use it to make business purchases; why should I want a business credit card? Having one too many credit card is a bit too much, I think?
Before I answer the above, let’s go back to the root of the “problems” and let’s trace from there.
Running a business, you will eventually need to make purchases for your business. While some purchases can be acquired with cash on hand, some others don’t. In fact, quite often, you simply don’t have cash to secure the purchases, even if your business is having a healthy cash flow.
Here’s an example. When you receive large orders – especially those which are coming during a short period of time – you often need funding to prepare the products and services ordered, often beyond what your cash flow can handle. For a retailer, this typical rush occurs during holiday seasons.
When securing funds, there are many options a small business owner can choose from; one of the most popular – and easiest – ways is using credit cards to make business purchases.
Credit card funding is popular for one major reason: It’s quick and easy to access when you (urgently) need it. You just need to put your purchases on credit and pay the amount you owe next month: A great solution for handling a surge of orders.
While many business owners are putting their business purchases on their personal credit cards, it’s recommended for you to take a different route: Applying for business credit cards.
Now let’s go back to the questions early in this article; Why do you need to apply for a small business credit card, even if you already have a personal credit card which limit can actually support your business needs?
The short answers: You should separate your personal finances from your business finances. Moreover, business credit cards offer perks your personal credit cards don’t.
Here’s the longer answer: There are 5 reasons for you to apply for a business credit card:
1. Maximize the benefits of your corporate veil
It’s the best practice to separate personal and business expenses. Separating those can help your bookkeeping and accounting, as well as avoiding you from any issues and liabilities related to your business. If your company is incorporated, separating your expenses means you have access to maximum protection from business liabilities offered by the corporate veil.
Moreover, just like your office premise, a business credit card can show legitimacy of your business. Not only that, it can also help you keeping your business accountable, by not mixing personal and business credit card payments.
2. Business credit cards help you build business credit
When you make business purchases from your personal card, you are actually impacting your personal credit score – in a good and bad way. By shifting all business-related purchases to a business credit card, you are helping your business to to build its own credit-worthiness. Indeed, a credit-worthy business means that you can access to better funding options only available for businesses with good to excellent business credit rating.
3. Add employee cards – and track their spending
One of the biggest perks a small business credit card has over personal credit card is the ability for you to add employee cards. Your employees can make business purchases using your line of credit – and have their spendings tracked for controlling purposes.
4. Quick access to purchases records and reports
Your business purchases will be tracked by your credit card issuer. Better yet, you can easily access the purchase records and download them for your bookkeeping and accounting needs. Major credit card companies also provide you with quarterly and yearly summaries, accessible online.
5. Exclusive perks to business owners
There are many types of business credit cards on the market, each and every of them offering various exclusive perks for holders. From frequent flyer points to cash back rewards; from to insurance coverage to zero foreign transaction fees; you need to consider your options well.
This is where credit card companies are competing for your business, pitching you with the most attractive offers – using various marketing tactics.
Here’s a good example; Capital One has launched a Vine claymotion video campaign, which purpose is to promote their Spark Cards’ 2% cash back on every purchase – in a fun way, the way a Vine video should. Check it out:
Before you go…
Here’s a reminder for you: Before you apply for any credit cards for your small business, you need to know what your business really needs. This is important as every card is unique for a certain set of perks.
Are you traveling a lot? Are you making frequent purchases on daily basis? Do you need to issue cards for your employees?
You need to have solid answers to those questions – or else, you could end up paying more costs and enjoying less benefits than you should.
This post is sponsored by Capital One