Funding is necessary for small and large businesses to maintain operations and financial stability. One typical funding option for companies is business credit cards. However, there are several options for the best business credit cards for entrepreneurs.
Companies usually need to assess their business needs and decide which type of credit card is suitable to help them accomplish their goals and drive growth. In other words, business credit cards are essential to a company’s finances.
Keep reading for the importance of business credit cards, different types, and their benefits for businesses!
Why Business Credit Cards Matter For Entrepreneurs?
Business credit cards are financial tools that could help entrepreneurs build business credit and manage cash flow. As a funding option, a business credit card is specifically designed to help a company manage its expenses, payments, and purchases.
Business credit cards work similarly to personal credit cards, except their intent is to cover the expenses of a business instead of personal ones.
In other words, with a business credit card, companies may only pay for business expenses, such as:
- Cover employee salaries
- Purchase equipment
- Pay for marketing and advertising services
- Cover travelling expenses for the employees
Business credit cards usually come with credit limits, much like regular credit cards. The credit limit is the amount up to which the business may spend using the credit card.
Businesses may not exceed their credit limits; if they do, the credit card will not work until they pay back the agreed amount and the outstanding balance.
As long as they are utilised responsibly, business credit cards can help entrepreneurs build their credit scores and have a steady cash flow.
Best Business Credit Cards
Low Interest Rate Business Cards
Interest rates are significant when choosing a business credit card. Choosing a low-interest-rate business card may help companies stay on top of their business expenses.
This type of credit card is normally a good choice for entrepreneurs who carry a balance on their cards monthly, as it could help them save money. A lower interest rate may also provide businesses with benefits like interest-free days.
No Annual Fee Business Cards
No annual fee credit cards typically work like regular credit cards, except you don’t have to pay a fee to keep the account open. However, this often means they are less likely to offer perks and other charges, such as balance transfers, foreign transactions, ATM cash advances, maybe higher.
In spite of these drawbacks, no annual fee cards can still save your business money over time compared to cards with annual fees. Some may allow access to a rewards program.
Premium And Travel Business Cards
Businesses whose operations often involve travel need a business credit card that will meet their unique needs. These companies may benefit better from premium and travel business cards. Premium and travel business cards typically provide benefits like airport lounge access or hotel status.
Fuel And Expense Management Cards
Businesses that utilise vehicles often in their daily operations likely spend more on fuel than companies that do not. This is why they should consider getting a fuel and expense management business card. These cards could provide businesses with accurate fuel expense reporting to maximise business efficiency.
Corporate Cards For Large Businesses
Corporate credit cards, which have higher credit limits, are the most suitable option for larger businesses. They could allow these businesses to manage their cash flow and control business expenses.
Benefits Of Business Credit Cards
- Building business credit: One benefit of credit cards is that they normally allow businesses to build positive credit scores as they keep spending and repaying their limit, showcasing their responsibility.
- Flexibility and cash flow management: With a credit card, companies may benefit from readily available cash, which allows them to allocate funds where needed.
- Perks and rewards: Companies could earn rewards and perks by redeeming the points they earn by using their credit cards.
- Separation of personal and business expenses: Companies might enhance their cash flow management by separating their business expenses from their personal ones.
- Access to higher credit limits: Business credit cards usually provide higher credit limits than personal credit cards, which might increase a business’s cash flow.
Considerations For Using Business Credit Cards
- Assessing business needs: The first consideration is to analyse the business’s spending habits and determine what type of credit card will benefit most.
- Understanding credit terms and conditions: Before applying for a business credit card, a business should pay attention to interest rates, annual fees, foreign transaction fees, and other associated charges and fully understand them.
- Monitoring credit impact: When applying for a business credit card, businesses should be aware that not making timely payments might negatively impact their personal and business credit scores.
- Employee access and controls: It’s essential that companies have a clear list of who will be authorised to use the business credit card.
- Security features: Businesses should look for cards that provide fraud protection and security controls. These usually include the ability to set up purchase alerts, spend limits, and other security controls to prevent unauthorised transactions.
Documents To Prepare For Applying For A Business Credit Card
When applying for a business credit card, the applicant should have all the necessary documentation. Missing or inaccurate documents may result in their application being rejected. The documents often include:
- Personal Identification
- Business Identification and Legal Structure
- Financial Statements and Documentation
- Credit History Reports
- Business Reports and Plans
Frequently Asked Questions
What is a personal guarantee, and do all business credit cards require one?
A personal guarantee means the applicant is liable to pay off the card. The lender may take their personal assets if they don’t make payments. Some business cards require a personal guarantee, while others don’t.
Can I get a business credit card if my business is new or has no credit history?
While it is more challenging for such businesses to get credit cards, it is not impossible. They may apply for a business credit card with no credit check, but these tend to have higher interest rates.
Conclusion
The best business credit cards are those that match the company’s needs and provide the most benefits. There are some different options such as low interest rates, no-annual-fee travel, fuel, and corporate credit cards for businesses. Each type of credit card is designed to meet the needs of different businesses and help them grow financially.