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Should I Apply For A Small Business Credit Card?

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Should I Apply For A Small Business Credit Card?

By Marco Carbajo, Guest Blogger
Published: September 20, 2012

A small business credit card should always be the credit card you use when making business purchases. Transactions such as paying for gas in a company car, buying office supplies or taking clients out for lunch are all acceptable ways to use a small business credit card.

When it comes to personal credit cards, you should not use them for business expenses. This can potentially jeopardize the protection of the corporate veil because you are co-mingling funds. Did you know corporate veil piercing is the top litigated issue in corporate law today?

That’s a scary thought because statistics show that of the 65% of small businesses using credit cards, only 50% of those cards are actually in the company’s name.

In addition, each type of small business credit card serves a unique purpose and offers its own array of features, perks and benefits.

A common mistake is applying for a card without first identifying the needs of the business. Will the card be used primarily for air travel, automotive or daily purchases? Do you prefer the option to pay off purchases each month or carry a balance? Will the company be issuing cards to employees or will there be a single cardholder?

These are important questions that give you an indication of the importance in defining purpose. Without purpose you can end up obtaining a small business credit card that costs more and benefits you less.

Some of the benefits of a small business credit card include:

  • Easy financing: Rather than waiting for an approval for a loan, lease, or line of credit, a business credit card lets you purchase items immediately. No explanations are required and there are no limitations on what you can purchase with your card. As long as you make the minimum payment each month and don’t exceed your limits, it’s a great option for quick cash.
  • Fast Access to Cash: If your company needs cash fast, then a small business credit card can be a life saver. Typically, the cash advance limit on a business credit card is lower than the spending limit, but the ability to access cash immediately is extremely convenient.
  • Track Expenses: Managing your company’s expenses becomes much easier when you completely separate your personal and business expenses. With a small business credit card, all your purchases are recorded, making it much easier for your bookkeeper during tax time. Also, most business credit cards will issue year-end statements that categorize your annual expenses into specific categories.
  • Control and Manage Employee Spending: Issuing small business credit cards to employees can offer many tax advantages. However, it is important to select a card that offers you the ability to control spending and set limits.
  • Business Perks: Business credit cards offer a variety of benefits for companies such as travel assistance, purchase protection, cash back rewards and insurance protection.

Many business owners have multiple cards with each one designated for certain purposes. For example, one card for employee expenses, another for business necessities, etc. Either way, it is helpful to have two or three small business credit cards available. Take the time to research, compare cards and reap all the benefits a business credit card has to offer.

About the author

Marco Carbajo is CEO of the Business Credit Insiders Circle (http://www.businesscreditblogger.com), a step-by-step business credit building system providing credit recovery, lines of credit, business credit cards, trade credit, and funding sources.

About the Author:

Marco Carbajo

Guest Blogger

Marco Carbajo is a business credit expert, author, speaker, and founder of the Business Credit Insiders Circle. He is a business credit blogger for Dun and Bradstreet Credibility Corp, the SBA.gov Community, About.com and All Business.com. His articles and blog; Business Credit Blogger.com, have been featured in 'Fox Small Business','American Express Small Business', 'Business Week', 'The Washington Post', 'The New York Times', 'The San Francisco Tribune',‘Alltop’, and ‘Entrepreneur Connect’.

Comments:

Yeah...definitely we can track business expenses by using debit/credit cards. I've saved your site into bookmark for future reference. Nice credit cards tips for any small business owner.
As long as you keep good receipts, and don't co-mingle funds you should be alright. When you get the credit card statement, just let the business pay, by separate check, the charges applicable to the business. Then pay with a personal check the charges applicable to the individual. When you're new in business, it might not be possible to get a separate credit account in the business name only.
Yes by using the credit card or debit card it is useful to track the busienss expenses it means outgoing funds. (This post was edited to remove a link. Please review our Community Best Practices for more information about how best to participate in our online discussions. Thank you.)
Hi Marco. I found your blog very informative. I own a small business that my wife and I started about 3 years ago, and we make purchases on a daily basis for our company (mainly gas and car washes for company cars). These purchases are made using a debit card linked to our business account. We have a few employees whom we would like to issue company credit cards to but it seems impossible to get approved for line of credit with my bank. Any tips for a small business owners to acquire a line of credit? Thanks in advance! (This post was edited to remove a link. Please review our Community Best Practices for more information about how best to participate in our online discussions. Thank you.)

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