When you’re financing a startup, it’s not unusual to use a mix of professional and personal funds. As you’re setting up accounting systems, however, it’s helpful to get a business credit card. Whether you’re buying supplies or paying rent, these cards have some significant benefits for your company.
Benefits Of Business Credit Cards
When you use a personal credit card, the liability lies with you. If you use a personal credit card for business, that means that you are responsible for paying the bill even if the company goes under. With a business credit card, the company holds the liability. If the worst happens and the company has to default on the credit card debt, it doesn’t hurt your personal finances. In fact, it could protect your home, car, and other assets. Keep in mind that different business cards have different terms, so it’s important to understand liability before you start charging.
Easy Expense Tracking
Running a business involves a variety of purchases, from office supplies to heavy machinery. To stay GST-compliant and maximize tax credits, you need to track all of these expenses. This is where a business credit card can save you a great deal of time. The advantage is in the simplicity — there’s no need to weed through a sea of charges to figure out which were personal and which were for your business. Since all of the charges are business-related, you can connect the card to QuickBooks so your transactions import automatically. This convenience makes it easier to manage your finances and keep an eye on your cash flow.
Higher Credit Limits
Since businesses often need to purchase high-ticket items, credit card companies may be able to offer higher credit limits on business cards. Higher limits mean that you can buy machines, computers, and other expensive items outright. They also expand your total available credit, which can be useful for emergencies.
Build a Business Credit History
Chances are, your company will need to borrow money as it grows. You might want to get a bank loan or apply for lines of credit through individual vendors. When you use a business credit card in the beginning, it establishes a credit history. Lenders look at this credit history when they evaluate your funding application — if you’ve made payments on time and used your credit wisely, you have better odds of being approved.
Controlling Employee Spending
As a business owner, there comes a point when you need to delegate spending to one or more employees. It can be nerve-wracking to hand over your personal credit card to another person. With a business credit account, you can have cards made for each employee. They can sign for purchases, and you can monitor their spending easily using purchase alerts or an online app. Some credit cards also enable you to set a charge limit for each card on the account, so you don’t have to worry about out-of-control spending.
Business credit cards can be a great way to increase your company’s spending power. As long as you read the terms of each card closely, you can use these cards to grow faster and protect your personal finances.