Should I Apply For A Small Business Credit Card?

Small Business Credit Card

A business credit card should always be the credit card you use when making business purchases. Transactions such as paying for gas in a company car, buying office susmall business credit card pplies, or taking clients out for lunch are all acceptable ways for a small business credit card to be used.

When it comes to personal credit cards, you should not use it for business expenses. This can potentially jeopardize the protection of the corporate veil since you are co mingling funds. Did you know corporate veil piercing is the top litigated issue in corporate law today?

That’s a scary thought if you think of it since statistics show that of the 65% off small businesses using credit cards, only 50% of those cards are actually in the company’s name.

In addition, each type of small business credit card serves a unique purpose and offers its own array of features, perks, and benefits.

A common mistake is applying for a card without first identifying the needs of the business. Will the card be used primarily for air travel, automotive or daily purchases? Do you prefer the option to pay off purchases each month or carry a balance? Will the company be issuing cards to employees or will there be a single cardholder?

These are important questions that give you an indication of the importance in defining purpose. Without purpose you can end up obtaining a small business credit card that costs more and benefits you less.

Some of the benefits of a small business credit card include:

  • Easy financing:  Rather than waiting for an approval for a loan, lease, or line of credit, a business credit card allows you to purchase items immediately. No explanations or limitations on what you can use your card for. As long as you make the minimum payment each month and don’t exceed your limits it’s a great option for quick cash.
  • Fast Access to Cash: If your company needs cash fast, then a small business credit card can be a life saver. Typically, the cash advance limit on a business credit card is lower than the spending limit, but the ability to access cash immediately is extremely convenient.
  • Track Expenses: Managing your company’s expenses becomes much easier when you completely separate your personal and business expenses. With a small business credit card all your purchases are recorded making it much easier for your bookkeeper during tax time. Also, most business credit cards will issue year-end statements that categorize your annual expenses into specific categories.
  • Control and Manage Employee Spending: Issuing small business credit cards to employees can offer many tax advantages. However, it is important to select a card that offers you the ability to control spending and set limits.
  • Business Perks: Business credit cards offer a variety of benefits for companies such as travel assistance, purchase protection; cash back rewards, and insurance protection.

Many business owners have multiple cards with each one designated for certain purposes. For example, one card for employee expenses, another for business necessities, etc.

Either way, it is helpful to have two or three small business credit cards available. Take the time to research, compare cards, and reap all the benefits a credit card for small business has to offer.

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About the author

Marco CarbajoMarco Carbajo is a business credit expert, author, speaker, and founder of the Business Credit Insiders Circle. He is a business credit blogger for AllBusiness, a subsidiary of Dun and Bradstreet and author of “Eight Steps to Ultimate Business Credit” and “How to Build Business Credit with No Personal Guarantee.” His articles and blogs have also been featured in the SBA Community, American Express Small Business, Business Week, The Washington Post, The San Francisco Tribune, Scotsman Guide, Alltop, Entrepreneur Connect, and Active Rain.