When you first start a business, finance is usually one of the biggest concerns. Even if you have all of the capital you need to start up, or are running a business that doesn’t require too much by way of initial investment to get off of the ground, you do need a strategy for how you will handle money coming into and out of the business.
One financial product that could help with this are small business credit cards. These work effectively in the same way as personal credit cards, however the rates and terms are tailored more toward business use.
Here, we look at some of the advantages of business credit cards, and whether they may be a financial product you should consider an essential for your startup.
Cash Flow Benefits.
The key advantage to a credit card over other forms of business credit such as loans, is that it can be a great way to deal with cash flow issues. If you run the type of business where you often need to pay for supplies or services before you are paid by your customers, then your business can face some serious issues if you don’t have the money available to pay for those supplies. While a loan would allow you to get access to the money you need, it is a harder thing to manage on a regular basis than using a credit card as payment and then simply paying it off when you are paid by your clients.
When Clients Pay Late.
You can also handle late payments from your customers when you have purchased supplies on your business card by paying the minimum repayment if you have to – this isn’t ideal as you will have to pay interest, but it is better than failing to be able to make a loan repayment because a client was late paying an invoice.
Does This Affect Your Business?
Of course, not all businesses have cash flow situations. For instance, if you sell something digital that doesn’t cost you anything to reproduce then you may not need to buy supplies, and your costs for services like web hosting will be fixed. When this is the case, a business credit card may be handy for emergencies, or for if you want to invest money into something you want for the business without waiting for some payments, but it probably won’t be an essential.
There are other times when a business credit card is worth having purely for convenience. As an example, if you travel a lot and need to make hotel and travel reservations using a credit card, you may find it preferable for managing your business expenses to use a separate card for this. You may be able to get by with simply using a separate business bank account, but a credit card could add extra flexibility.
If you think a business credit card could be useful, there are plenty of different cards available for businesses of all types and sizes, so why not start shopping around?