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Top 5 benefits of using a business credit card

Find out why small businesses should use small business credit cards for their business purchases and how they can help with small business financing.

3 min read

A business credit card can be essential in helping growing businesses to meet their short-term financing needs. 

While there are less expensive forms of small business financing, advantages of a business credit card can’t be underestimated. A business credit card can offer a small business greater flexibility in meeting temporary needs while providing additional cash management capabilities.

Keep business and personal finances separate

Many small business owners use their personal credit cards in their businesses. This can complicate matters when preparing taxes, adding to the cost of an accountant who must sort through personal and business expense records. When personal and business records are commingled, it can raise a red flag for HM Revenue & Customs. It is not uncommon for the HMRC to disallow the deduction of business expenses paid with a personal credit card.

Controlling expenses

For businesses that authorise employee spending, corporate credit card benefits include built-in tracking and control mechanisms. With most business credit card issuers, the employer can obtain additional cards for employees at a low cost or at no additional cost. The employer can set separate spending limits for each card, which can be tracked online in real time.

More effective cash management

Making business purchases with a business credit card can improve cash management. Businesses can use the 30-day billing cycle to float the cost of a purchase in anticipation of receivables thereby keeping more cash working in the business. By using a business credit card, multiple records are automatically created through transaction reports and online statements, simplifying record keeping. Using a business accounting software program such as QuickBooks, transaction data can easily be imported from an online bank account for quick and accurate data compilation and cash flow analysis.

A business credit card offers a small business greater flexibility in meeting temporary needs while providing additional cash management capabilities.

Keep your cash flow in good shape

QuickBooks accounting software helps maintain a positive cash flow, keeping your business in peak fitness.

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Earn cash back

Many business credit cards come with cash-back rewards programs that can have a significant impact on cash flow. Some cards generate higher rewards for business-related spending, such as travel and office supplies, but rewards are earned on all purchases made by the business or any of its employees. Businesses that spend a lot on travel-related purchases can benefit from a travel rewards card to earn points that can be redeemed for flights, hotels and car hires. Because some rewards programs emphasise spending in certain expense categories, such as travel, businesses should use a card that matches their spending patterns.

Build business credit

A business credit card is typically the first type of financing a business obtains. It is often the first step a business takes in building its credit history, which is essential to qualifying for other financing options. It would be important to confirm whether a business credit card issuer reports credit activities to the business credit reporting agencies; not all of them do. With some issuers, the business credit card is issued based on the business owner’s personal credit. While this still provides the business with separate reporting for business expenses, it doesn’t help the business build its own credit.

References & Resources

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