Did you know that almost 46% of the startups use their personal credit cards to keep their startups afloat, only to realize their mistake later? Unlike personal credit cards, a business credit card is one of the most important financial tools that every business owner needs in any startup’s toolbox. It’s way more than just a means of making payments and obtaining credit. In fact, a business credit card is a unique, flexible form of financing. It protects you against liabilities and delivers rewards and perks specific to what’s important to you and your business.
To help you understand and explore how business credit cards set you up for success, here’s a list of some of the key benefits why every business owner needs a business credit card to build their startups.
Steering clear from mingling up the business and personal spending trap
You’ll eventually need to make purchases regardless of whatever niche you choose to explore or whichever direction you wish to drive your startup. While putting all these expenses through your personal credit card and racking up the points may sound like an easier way to move forward, many startups fall prey to this practice. But logistically, separating your business and personal expenses from the get-go makes it easier to track what and how much you spend on your business. After all, you don’t want your inventory purchases getting mixed up with the charges for dog food or even movie tickets. Trust me! When the time comes to pay the taxes at the end of each business cycle, your accountant will be thankful that you did not mingle your business transactions with personal onto a single account.
Protecting your personal assets from legal liabilities is worth your while
When you decide to build your startup, your business will likely fall under an LLC, a partnership, a C-Corp, or even an S-Corp. If you continue to choose to use your personal credit card to pay for your business and do not separate the two, there are bound to be legal implications that you must be wary of. In simple words, if your finances aren’t divided, you will not be able to enjoy any of the legal or liability protection for your personal assets. If things go south, you could end up being personally liable for any lawsuits that call for damages against your business.
Building a good business credit score matters!
Anyone who has recently started their own business knows the importance of building a business credit score. While you may have ample knowledge about building your personal score, building your business credit score is an entirely different ball game based on many different factors, one of them being how responsibly you use your business credit card. Not only this, but once you start to build your business credit, you automatically invest in its future by creating more affordable financial possibilities for your business. Maintaining a good business credit score helps new entrepreneurs in several ways. From negotiating with your vendors to obtaining reasonable terms on your business loan is all dependent on how you maintain your business credit score. Not only this, but a good business credit score can also improve your personal credit in the long run.
Enjoying a higher spending limit
Another reason why every business owner should invest in a business credit card is the “spending limit.” Credit card companies offer a higher spending limit on a business credit card than a personal one since they are well aware of the fact that businesses will most likely have to spend more than what an individual does. That means you likely won’t have to max out several credit cards to cover all of your business expenses.
Acting as a financial safety net
As a newly established startup, you will most likely have to fight many battles on different fronts. One of these is learning how to deal with inconsistent revenue and unexpected purchases while balancing your cash flow. Moreover, since startup costs can be quite fickle, you can’t always depend on a large sum of savings to cover them. Having a business credit card can come in handy in such times and be used to cover unexpected expenses while giving you the time to move around funds and pay them off by your next payment period.
Provide a means of low-cost financing
A business credit card is quite similar to the traditional forms of business financing, such as a business credit or even a line of credit. By obtaining a business credit card, you are essentially borrowing money for some time and then paying it back later with interest. Nowadays, to help startups flourish, many credit cards also act as low-cost or even free financing, thanks to introductory periods with a 0 percent APR.
The opportunity to earn benefits, rewards, and perks
Just like your personal credit card, a business credit card also offers businessmen a number of rewards, perks, upgrades, and benefits that can either offset some of the cost of your purchases or make running a business more enjoyable. Although every business credit card may differ, a vast majority of them offer points or cash backs on purchases like airfare, social media, and even office supplies. Not only this, but many also offer travel and cell phone insurance, car rentals, and even subscription discounts on business tools like G Suite and Salesforce. As a result, with every purchase you make from your business credit card, you earn a slight discount which may even turn into a sizeable one if utilized effectively.
The Bottom line
Remember! As an entrepreneur who just started with their first startup, your finances are most likely limited. While you may have some investment or even personal savings, or even a startup loan, owning a business credit card allows you to enjoy financial flexibility. At the same time, you build up your financial resume and get your ducks in a row. All this, coupled with the vast array of rewards and perks offered by a business credit card, is more than enough reason why every business owner must invest in a business credit card. So go ahead and choose from these top business credit cards for startups. After all, it’s your first step towards ensuring your business’s success.