When it comes to credit for a small business, loans are typically the first options that come to mind. Small business loans are great options for infusing capital into a small business or to finance a property purchase, equipment or other operating needs.
For daily operating expenses, a small business credit card can provide great value for the business, building the business’ credit, earning rewards (such as cash back to put back into the business), and having availability for businesses of all sizes, from sole proprietorships just getting established to larger companies with multiple cardholders.
Here are some best practices for using a credit card for your business.
A small business credit card is great for paying vendors, handling travel expenses and treating your employees to lunch.
Buying personal goods and services? Not so much.
It is important to keep personal and business expenses separate because your company is an independent entity from you and your personal finances. You also want to build business credit separate from your personal credit, so as your business grows, you’ll have more leverage to secure larger business loans.
And don’t forget about taxes. Keeping personal and business expenses separate allows you to take advantage of tax deductions, including writing off business expenses. Just make sure you are keeping accurate records for all expenses, both business and personal, for all transactions including those made on your credit cards.
Spend Money to Make Money
We all know that to keep your business’ operations humming, you need to buy goods, services and equipment. Having a small business credit card provides a line of credit to make purchases that can help you fulfill business orders.
This is especially helpful during times of lower cash flow, and your small business credit card can also offer purchase protections that you wouldn’t receive if paying for these business needs with cash.
Whether it’s travel arrangement protection for a cancelled business trip or a vendor purchase goes awry, check with your small business credit card issuer to learn more about what, when and where you are covered when making purchases with your credit card.
Make Money While Spending Money
Many small business credit cards offer rewards such as cash back, points or miles. While it is great to earn these rewards, make sure you are leveraging them to invest back into the business.
For example, if your employees have a lot of monthly expenses as part of their jobs, consider having multiple signers on the credit card account and have them use the card versus filing monthly expense reports. This not only cuts down on expense report processing for you and your accounting team, but also compounds your business’ rewards earnings.
More signers = more spending = more rewards!
Wherever your business is in its life cycle, using a small business credit card can reap short and long-term benefits that help strengthen your spending and earning power as your business grows.
Helping you boost your financial intelligence.
Read our financial resources from your friends at WSFS.