Small business credit cards are becoming increasingly popular amongst small business owners in need of capital to start or grow their business. According to the National Small Business Association, 2009 Small Business Credit Card Survey, at least 86% of small business owners reported that they were using credit cards as a crucial part of their business capitalization strategy. Based on this number, I believe it’s safe to say, all small business owners should consider examining the advantages of applying for small business credit cards and using them to start or grow their business. Here are 5 reasons why you should consider applying for a small business credit card if you are a small business owner:
- Separation from Your Personal Credit – Obtaining small business credit cards will enable you to separate your personal credit from your business credit. Using personal credit cards to fund your business expenses may impact your personal credit score and history because lenders will report your credit card usage to the personal credit bureaus. It’s wiser to use small business credit cards to cover business expenses, because most lenders will not report your small business credit card usage to the personal credit bureaus (unless you default). Therefore you rarely have to worry about small business credit cards impacting your personal credit score and history.
- Build Your Business Credit – Obtaining small business credit cards will enable you to start building your business credit score and history. Some lenders may report your small business credit card usage to corporate credit reporting companies such as Experian Business or Dun & Bradstreet. Reporting your small business credit card usage to these companies will enable you to build a credit score and history. Eventually, you may be able to qualify for small business financing strictly using your business credit (without providing any personal guarantees). As a small business owner, it would be wise to strive for building a good business credit score and history so you no longer have to qualify for financing strictly using your personal credit score and history.
- Low Cost & No Collateral Needed – Many small business credit card providers offer credit lines that have 0% introductory interest rates for the first 6 to 12 months. This means you can use the small business credit cards without paying interest (up to the end of the first year)! Furthermore, small business credit cards are typically unsecured which means you do not have to pledge collateral to be approved. With small business credit cards, you are able to keep your costs low and protect your assets.
- Larger Credit Limits – Most small business credit cards have larger limits than your typical personal credit cards. Small business credit cards can have limits of up to $20,000 or more. Lenders will continue to increase your credit limit (over time) if they see that you are able to maintain it well. This is good for small businesses that need to make sizeable purchases. Higher credit limits may also help you avoid a high debt to credit limit ratio. The bigger the small business credit card limit, the less you may need to use.
- Plenty of Rewards – Small business credit cards often come with plenty of perks and rewards. Many small business credit cards offer discounts on travel related expenses such as airplane tickets, hotels, and rental cars. This is especially good for small business owners who travel often. Other perks and rewards can include discounts towards goods and services needed to operate the business.
If you are interested in learning more about how a small business credit card can positively impact the growth of your small business, our Small Business Finance Advisors may be able to help. At LenCred, we are experts in the small business credit card arena! Please feel free to contact us today for more information.