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The Advantages of Business Credit Cards

While you are continuing to figure out your cash flow during the beginning stages of your business, using a personal or business credit card may best type of financing to help you with those unexpected expenses.

If managed properly, a credit card can help you get started and take care of any financial challenges along the way. Check out the benefits of using a business credit card here:

  • It’s a Simpler Financing Option Than a Bank: Getting a new business loan from a traditional lender is not easy when you are first starting out. In most cases, banks require you to have a good credit score, put up collateral, and have some business history. When you apply for a business credit card, you don’t need collateral or a long business history. However, you will need at least a fair credit score to get approved. A business credit card also gets approved must faster than a bank loan, which can take a couple of months.
  • Credit Cards Offer Incentives and Rewards: Many credit card companies offer bonuses just for using their cards. Some even offer a percentage back on every purchase you make. This way you can make money for other purchases while paying for business expenses. Additionally, the most sensible way to use any credit card is to pay it off sooner than later. A good way to achieve this is to look for balance transfer opportunities with a competing credit card brand. Many times, a credit card company will offer a year or more interest free if you transfer your balance.
  • Better Manage Cash Flow: A credit card can help you better manage your available cash. For instance, if you work in a business where you get paid once per month, you could charge all of your expenses, send out an invoice at the end of the month, and then, pay off your credit balance once you get reimbursed. This allows you to avoid paying interest and never forces you to dip into your cash flow to cover business expenses.
  • Monitor Your Expenses: It is not rare for one person to handle everything at a startup. Therefore, it is likely that there will be one keeping a log of expenses. If all expenses are paid using one credit card, the monthly statement provides a breakdown of what you bought.

In Conclusion

There is one important factor to remember when using a credit card to jump start your business ventures. Since credit card companies do not question your purchases before they approve you for credit cards, there is a certain level of financial vetting that is removed from the equation. If you are not disciplined in the types of purchases you make with a card, you can rack up debt quickly. For example, if you are charging networking dinners and new furniture purchases, instead, of using the funds for payroll, you could be looking at even greater financial problems down the line.

However, if you plan to manage a business card responsibly, it can definitely help you get your business on the right track.

As a new business, it also is important to be prepared to operate as a high risk business, which means you should expect to pay higher rates and fees. Getting the best rates is likely easier if you move forward with a high risk credit card processor.

First American Merchant (FAM) offers high risk credit card processing with a host of benefits. In addition to competitive rates, FAM offers programs and services that help with chargebacks. If you or your company are going through or has gone through bankruptcy, we also have solutions that allow you to continue processing.

When you work with FAM, it strives to make the impossible, possible. Contact FAM to learn more about high risk credit card processing.