Are small business credit cards useful?
As obvious from their name, small business credit cards are a specific breed of credit cards which are meant for small businesses only. These credit cards are in the name of business itself and not in the name of a person (as is the case with the personal credit cards).
Now what’s so special about small business credit cards?
Well, if you were to look at a very high level, there isn’t much difference. As any other credit card, the small business credit cards too offer credit albeit to a small business. However, the specialty about small business credit cards lies in the benefits it brings to the small business (and hence to the small business owner). These benefits include things like flexible credit limit and attractive APR.
However, the most important benefit lies in business expense accounting which is automatically taken care of by the small business credit without you spending any effort or any money for that. The only thing that you have to do is ensure that you make your business related payments using your small business credit card and all the personal expenses on your personal credit card. So all you are doing is just segregating your business and personal expenses. When the bill for the small business credit card arrives, you have all the business expense data sitting pretty & accurate in a well organized manner. In fact some of the credit card suppliers even group the various expenses under specific heads so as to further facilitate business expense accounting.
Also, since your personal and business expenses are segregated, you can do your financial and budget planning on both the fronts (personal and business) in a much better way.
The segregation of personal and business expenses also facilitates tax planning which otherwise becomes a nightmare.
Another advantage is in terms of the credit rating. Like with personal credit cards, small business credit cards too lead to a credit rating getting developed. In this case it is for your small business. So a small business can use these credit cards to develop and establish their credit worthiness in the market.
Small businesses, by their inherent nature, develop need for immediate cash for short periods of time. Arranging for bank loans each time is not just time consuming but also a big hassle. In such a scenario small business credit cards can become very handy. You can not only get the credit immediately (by using credit card to pay for these expenses) but also get it interest free (for a short period). The flexible credit limit on small business credit cards too plays its part by ensuring that this requirement is met significantly if not in full.
The other benefits associated with credit cards i.e. membership benefits, discounts etc are applicable for small business credit cards too. In fact, in this case these benefits grow in size due to the sheer fact that a business needs such services much more than an individual (and hence the benefits aggregate for a small business). A small business owner should consider such benefits when choosing a small business credit card for his/her business e.g. a business involving a lot of air travel could go for a co-branded credit card offered by an airline. Such credit cards will not only provide discounts but also offer things like free travel insurance.
With so many benefits, going for a small business credit card seem more of a prudent decision than anything else.