Why You Should Use a Credit Card for Small Business Purchases

For small business owners with little credit history, a credit card can be beneficial

10/23/2017 10:00:00 AM
Why You Should Use a Credit Card for Small Business Purchases

As a small business owner, you should always be looking for ways to grow your business and manage cash flow. Having a credit card specifically for your business can help you do so in a number of ways.

Using a business credit card will help you establish credit

You may not have enough credit history to obtain a business loan, especially if you are just starting your business or if your small business is relatively new. This is where having a business credit card can come in handy.

Many small business owners start out by using a personal credit card to finance their business needs; however, once your business has begun to turn a profit it’s important and beneficial to open a separate credit card just for your business. Doing so allows you to maximize the available credit you can have for your business and gives you better financing potential, while still maintaining the credit you may need for personal or family purchases, explains an article in Small Business Trends by Founder, CEO and Publisher of Small Business Trends Anita Campbell.

Furthermore, “it can be easier for business owners who do not have a well-established credit history to qualify for a revolving line of credit with a credit card, rather than a traditional line of credit or bank loan,” explains a 2017 Investopedia article.

The more you use the credit card and make on-time payments, the more you will build your credit history and the better your credit score will become. In turn, applying for a traditional line of credit will become easier, and you will be more likely to qualify for a larger loan with lower interest rates.

Another benefit of starting out using a credit card for small business purchases is that the application processing is generally quicker than with traditional loans. A credit card is also typically easier to qualify for, since it does not require you to put up collateral or assets for approval.

Credit cards can help manage cash flow and bookkeeping

Many small business owners opt to have a business credit card as a means to conveniently and quickly access financing for short-term needs. Additionally, a credit card can help cover cash flow for the business when sales are slow or payments are coming in late. And, since the card acts as a revolving line of credit, as long as you pay off the balance you can continue to access the credit and make purchases indefinitely.
Using a credit card for business purchases can also simplify your bookkeeping.

“In addition to receiving a monthly statement, most cards provide small business card holders with online record-keeping tools to manage their accounts, including a year-end account summary which can help a bookkeeper track, categorize and manage expenses,” explains Investopedia.
As you establish a relationship with the provider of the business card, you can use this relationship to your advantage to grow your business in other ways. For instance, if you apply for a business loan with your local financial institution, and you already have a business credit card from them, they will already be familiar with your good repayment history.

Lastly, many credit cards also offer rewards programs in the form of points or cash back. Often, these take the form of airline miles or shopping discounts for certain merchants, which can go towards future business expenses and needs.

As long as you can manage the spending and make on-time payments, having a business credit card can truly help your bottom line and keep the business thriving.

Learn more about North Shore Bank’s Business Credit Cards.

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