The Benefits of Having a Company Credit Card

Val Watson
Authored by Val Watson
Posted Wednesday, July 27, 2022 - 9:44am

Getting to grips with your business’s finances is a learning curve, to say the least. Initially, a lot of business owners think it is easier to have your business’s finances coming and going from your personal account, but this is a bad idea. You need to keep your personal finances separate from your business finances. One of the best things that you can do for your business, regardless of its size, is to consider getting a business credit card. Let’s take a look at the benefits.

The Convenience

First things first, having a company credit card is far more convenient. Without a company card, you would either have to carry around cash or use your personal credit or debit card. Either way, you would then need to be reimbursed for your expenses. This can take time, which isn’t ideal if you need the money back for your bills or the like. The benefit of a company card, like the ones provided by Payhawk, is the convenience that they offer.

Accountability & Purchase Protection

Offering employees company credit cards means that you can keep a better track of their spending. Each card will likely have its own number, so purchases can be traced back to the individual using the card. This means improper use of company funds can easily be attributed to the guilty party. Should one of the cards be compromised, there is also usually a certain level of payment protection which allows the charges to be disputed and halted while the matter is investigated and resolved.

Increased Cash-Flow

A lot of businesses, especially fledgling businesses or small businesses, have to operate on a tight budget. The availability of cash is important, and for many businesses, it can present a problem. Company cards allow you to make the necessary purchases regardless of whether you have the funds in your business account or not. While you will obviously have to pay the credit card company back, the payments will often be smaller and spread out over a longer period of time which evens out the cash flow making it easier for businesses to weather the ups and downs associated with a fledgling or small business.

The Application Process

Most of the time, company credit cards are more accessible than other forms of business financing. There is still an application process which needs to be followed, but it tends to be simpler than, say, applying for a business loan. You don’t need to have collateral to offer when signing up for a credit card, and your credit score matters less, too, which makes sense considering you need a credit card to build said credit.

Building Your Company’s Credit

In order to ensure that your business continues to grow and evolve, you need capital. The likelihood is that to reach your business’s goals you will need to look for ways to secure said capital; oftentimes, this will involve having a good credit score. As with your personal finances, the best way to build a credit score is by using a credit card. Using a company credit card steadily over time allows your credit score to build naturally. This then comes in handy when you need to secure a loan or other forms of financing. In addition, a good credit score can mean that you don’t have to offer as much collateral or act as a guarantor for the loans.

Analysing Expenditures

There are company credit card providers that offer a number of services alongside their cards. Choosing a credit card provider that offers software integration or analytics can be invaluable. It allows you to take a closer look at your business’s spending. You can potentially find areas where you can scale things back and save money or make more conservative choices. This might mean swapping suppliers, changing energy providers or looking for ways to make other business costs cheaper.

The Drawbacks

the benefits listed above are pretty convincing. However, in order to make an informed decision regarding the financial future of your business, you need to be just that: informed. That means taking into account the potential drawbacks that you might encounter. First and foremost, most providers will ask you to assume liability for the payments should the business become unable to fulfil the repayment obligations. This is why a lot of businesses wait until they are more established with a steadier income before they sign up for a business card. However, there are cards available for start-ups as long as they can produce a solid business plan. If you believe in your business and its potential success, then you might not want to wait.

Secondly, while using a credit card is a great way to gain access to the capital that you need, it can make the purchases more expensive in the long run. This is because if you end up with a high-interest rate, you will be paying back the price of your purchase and then some. Therefore, depending on the interest rate and the repayment term, it might not make the most financial sense for your business. Finally, there are also a number of barriers to accessing the limit that you need. While company cards do usually have a higher limit than personal credit cards, too, depending on the size of your business and its revenue, you might not be able to borrow the amount that you need. That being said, if that is the case, you might want to rethink your purchases to make them more affordable.

Choosing a Company Credit Card Provider

 There are several things to consider when choosing a credit card provider. First things first, you need to ensure that you are going to be eligible. Some providers only offer cards to bigger businesses, so be sure to check that you are going to match their criteria. You will also need to check the credit limit; think realistically about how much you will need. After that, you should check out the interest rates and the repayment terms. Some providers allow you to roll the debt over month-to-month with zero added interest for a specific period of time. This can be great for start-ups or small businesses that are still building their business and their revenue.

Always read the terms and conditions to ensure that your business won’t be on the hook for any hidden fees or loopholes. For example, after signing up, you might find that the provider expects you to pay a sign-up, usage, or annual fees. Although, some providers also do offer perks or a reward scheme like you would expect from personal credit cards, which might make the fees worth it, so it is something to consider carefully. Finally, it is always worth checking out the reviews to see whether similar businesses have had a good experience with them or not.

The Bottom Line

You do not necessarily need a credit card for your business, but they do have a lot to recommend them. They make it a lot easier to access the capital that you need to keep your business going whilst also helping to fund the growth of your business. However, it is important to point out that the provider that you choose will have a significant impact on your business’s finances, so it is imperative that you do your research.

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