10 Benefits Of Using A Business Credit Card For Small Business Owners
- Written by The Times
Over the past decade or so, business credit cards have become a really popular financial tool to help businesses manage their day-to-day expense requirements. With more and more card providers entering the market, competition has increased enabling innovation and growth in credit card offerings. The benefits of business credit cards have gone far beyond just getting credit for your daily operations.
What is a business credit card?
A business credit card is a financial tool offered by banks and NBFCs to organizations for incurring business expenses. These cards offer the company a credit line that the business can spend from and must repay within the stipulated time based on the contractual agreement. Acquiring such a card helps the business owner in streamlining their daily expenses and keep track of all payments.
10 benefits of using business credit cards for small businesses
- Manage cash-flow problems - One of the major problems that many small businesses face is a cash crunch due to an imbalance in their cash flow. This can hinder their ability to carry out daily operations smoothly in the absence of liquid cash. A business credit card uses a revolving line of credit that can help the company easily pay for daily expenses. This covers the gap left by a negative cash flow and prevents the business from being affected by low cash reserves.
- Easy approval process - Business owners will know all too well how tough it can be sometimes to get a loan. A business credit card on the other hand usually has a much easier application and approval process. This is usually because the credit being lent to your business through a business credit card is not a huge amount that you have to pay off over the years. Instead, it is comparatively a lower amount/credit limit that is lent each month which needs to be paid within the next month.
- Personal and business expenses can be separated - Before business credit cards existed, business owners did not have any choice but to use their personal credit cards. While the outcome in the short term is still the same, using a personal credit card for business expenses can have a negative implication on your taxes if your transactions exceed a certain amount. Separating your personal and business expenses and reducing tax liability is another benefit of business credit cards.
- Higher credit limits - Another reason you should choose a business credit card over a personal credit card is that they provide a higher credit limit. This is useful when higher amounts of payments need to be made that won’t be feasible through the limit available on your credit card. A higher credit limit also keeps your credit utilization rate low which positively affects your business credit score.
- Expense tracking and monitoring - Many business credit card providers offer a complete expense management system through software. This software platform is linked to the business credit card(s) and tracks all expenses in real-time giving you complete visibility over the expenses. In case you have multiple business credit cards that you issue to give your employees, you can also distribute the credit limit among different cards and set custom spending limits on each card to prevent overspending. This ecosystem helps you track, monitor, and control all your business expenses and reduce costs by identifying shortcomings in your expense management.
- Protection on purchase - Most business credit cards come with clauses for protection against fraud and unauthorized purchases. This is useful to have as you know that in case of theft or online fraud, the money being spent is insured and as soon as you report the fraudulent activity, you won’t be liable to pay for the losses.
- Rewards and benefits - As more and more business credit card providers enter the market, competition increases, and they start fighting for market share. In such scenarios, a business credit card provider that offers rewards and benefits in the form of cash rebates, cashback, reward points, travel miles, and other discounts often attracts more customers than those who don’t offer these perks. These rewards help small businesses save money and reinvest it into their business.
- Improves business credit score - Using a business credit card is a great way for small businesses to start building a credit history and improve their credit score. Building your credit score over the years with timely repayments of the complete amount due each month creates credibility and trust. Doing this opens up financing opportunities for small businesses to get higher loans at lower interest rates.
- Control over employee spending - Corporate cards are often synonymous with business credit cards or can be considered a type of business credit card that is issued to employees to manage daily business expenses. These cards can help business owners give their employees the freedom and flexibility to make spending decisions while still being in control through spending limits and controls that you can set through the expense management software that these cards are linked to.
- Fraud Protection - Business credit cards often come with security measures such as zero-liability protection and fraud monitoring that can help protect the business from financial losses due to fraudulent activity. These systems are capable of automatically detecting irregularities in spending behavior and can block the card temporarily to avoid further loss.
There are ample benefits to business credit cards and not using one for your business is a missed opportunity to improve your financial operations. While choosing a card provider can be tough, you must keep in mind your specific business needs and choose the card that best suits your requirements.
