As a small business owner, you probably would have received numerous emails and offers tempting you to apply for a small business credit card. A business credit card works just like a personal credit card. The only difference is that it is aimed at business owners, entrepreneurs, and freelancers to manage their business expenses.

It’s highly convenient and increases the purchasing power of your business, while building your company’s credit history. Owning a small business credit card provides business owners access to a revolving line of credit, which can be used for various business purchases.

Like a personal credit card, a small business credit card levies an interest charge if the balance is not paid in full in each billing cycle. Small business owners can apply for a credit card with their bank or apply directly with a credit card issuing company. In this article, we walk you through the incredible benefits of a small business credit card.

Top Reasons why you Need a Small Business Credit Card

There are several benefits of having a small business credit card. They are:

  1. Build your Credit History and Credit Score 

This is one of the most underrated benefits of a small business credit card. Having a small business credit card, using it for your various business-related expenses – and paying off the balances regularly – can help your company build a stellar credit history and boost your credit scores

Having a good credit score is beneficial for your business in several ways. It improves the credibility of your business while helping you avail better interests and deals on future loans.

  1. Increase the Cash Flow of your Business

Regardless of the size of the company, the nature of the business, having access to ample cash flow is an important priority for all small businesses. Having a small business credit card opens up the credit available to your business, thereby increasing your cash flow. You can use the credit card to purchase equipment, inventory, and supplies as and when you need, and pay for it on the next billing cycle.

Additionally, a business credit card is much easier to obtain than an OD, line of credit, or a traditional small business loan. It involves minimal documentation, and your card is approved within a couple of working days.

  1. Access a Large Credit Limit

When compared with personal credit cards, business credit cards offer higher credit limits. Having access to a large credit limit can help you make purchases that would not have been possible otherwise, using in-hand cash reserves. 

  1. Keep your Business and Personal Expenses Separate 

If you run a small company or are a solopreneur, it becomes challenging to keep your personal and business expenses separate. Having a small business credit card makes it easy to demarcate your personal and business expenses.

This not only helps you save time but also makes it convenient for bookkeeping and filing your annual tax returns.

  1. Enjoy Loyalty Points, Rewards, Cash-back and other Perks 

Like personal credit, business cards offer loyalty points, cashback, and other perks for various transactions. For example, let's assume you own a business credit card that offers travel points. In that case, you can accumulate points and redeem it on discounted (or even completely free) hotel stays and airline tickets. This way, it helps to keep your business travel expenses down.

Not just travel credits, business credit cards offer an array of rewards like – cashback offers on fuel, dining, shopping, and much more. 

  1. Keep Tabs on Employee Spending 

If your business has employees who make purchases, inventory supplies, or travel on behalf of your business, then providing them with a business credit card is highly beneficial. It makes it easy to monitor employee spending – you can quickly see how much they are spending and on what they are spending.

Additionally, you can also set limits on the business credit cards you issue to employees. Most credit card providers offer no-annual-fee credit cards for the employees of a company.

  1. Stay Organised with Business Expenses 

Besides keeping your personal and business expenses separate, having a business credit card also makes it easy to organise your expenses. It makes for effortless bookkeeping, helping you track your business spending every month.

You can analyse your monthly credit card statements manually to see your expenses. Alternatively, most business credit cards offer a mobile app or an online portal that makes it easy to track and file your costs. Having well-organised records is a huge time-saver, especially while you're filing IT returns, calculating GST, etc.

A Word of Caution

Credit cards are a double-edged sword. When you use it with caution, your small business can enjoy significant benefits. On the other hand, mismanagement and misuse of business credit cards can lead you into a debt trap.

For instance, most cards offer a 30-day grace period for paying the bills. However, if you neglect to pay the bill within the due date, you incur late fee penalties. The interests charged on delayed credit card payments are quite steep. Additionally, delayed or missed payments can negatively impact your credit score. Similarly, using your business credit card to withdraw cash can help you out in an emergency. But, remember this feature comes with steep fees. 

Finally, having too many credit cards can impact your credit score and make it challenging to keep track of all the bills. So, make sure to limit yourself to just one or two credit cards for your small business.

Final Thoughts 

Make sure that you read the fine print carefully before applying for a small business credit card. Don’t forget to shop around and compare offers from leading credit card providers like MasterCard, Visa, and American Express. Evaluate the interest rates, rewards, grace period, and other features, to choose the best credit card that offers the maximum benefits for your business.