There are several ways to fund a small business. But it is important to understand the offer you are proposed and how to use the deal to its full potential. A credit card is known as one of the best ways to fund a small business and it appeals to many new business owners who are managing their operations with limited resources. Getting a business credit card may not be a desirable option for many, but it offers a variety of benefits to both new and established business entities.
In this article, you will read the definite benefits of using a credit card to fund your business and how it can improve your finances to generate more revenues.
Lower Interest Rates
Credit cards usually come with lower interest rates than other types of business financing. According to professionals, the annual percentage rate (APR) for a business credit card is 15 to 22%. Which is much lower than other sources of financing such as asset bases lending. Even most credit card companies offer 0% APR for a specific period of time that helps businesses save a big deal of money in terms of paying no interest rate towards monthly/annual payments.
No Balance Transfer Fees
There are some credit cards with no balance transfer fees. If you are looking to pay for startup costs, you should apply for a card with a balance transfer offer. In this way, you can transfer the balance of a credit card to another one with a lower or 0% interest rate. Not only to fund a small business, but credit cards with no balance transfer fees can also help businesses pay off debt faster without making payments towards interest.
Revolving Credit
When you apply for a business credit card, you have revolving credit that you can reuse once paid for a month. When the payment of a credit card is made in full at the end of the month, you can use it again for the next month to meet the financial needs of the business. In this way, you can manage business finances more efficiently even without borrowing money from somewhere else.
Credit card Reward Programs
Business credit cards have more rewards and perks for the owner than personal cards. Your business will be able to earn free points, cashback, rewards, and airline miles by making a business purchase with a credit card. Some companies also offer sign-up bonuses for new customers and that money can be used anywhere else where you feel fit.
Improve Cash Flow
Credit cards are extensively used by business owners to manage and improve cash flow. It is a convenient and affordable way to make important business purchases even when you don’t have enough cash on hand. Smart business owners their spending into different categories so they can keep proper track of their spending and cash flow as well.
Automatic Expense Tracking
A business credit card allows you to track business spending conveniently without making any extra effort. Your monthly statement shows it all. The monthly statement generated by credit card providers usually contains details like date of transaction, time, amount, description, and additional fees if any. It simply puts expenses tracking on autopilot. Furthermore, some credit card companies also allow their customers to integrate monthly statements into their accounting and bookkeeping solutions like QuickBooks to save a big deal of time and effort. It not only streamlines the expenses tracking process but also helps the business owners a lot when it comes to filing the tax return.
The Bottom Line
There are both pros and cons to using a business credit card to fund your business. Responsible use of a credit card not only helps you meet the financial needs of your business but also helps you build good business credit separately.
