Is a Business Credit Card Right for Your Business?

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By Robert Bast

Topics: credit and cash flow

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Read Time: 4 Minutes

Some business owners don’t consider business credit cards a good credit option. But that’s often not the case. Here are some reasons that may have you thinking otherwise.

Quick & Easy Access & Approvals

Credit cards are an extremely convenient credit option. They give you access to quick funds for making purchases or cash withdrawals and are much easier than having to get cash from the bank or use a chequebook.

Most times, when applying for credit, business credit cards get approved within minutes whereas loans can take up to 90 days to finalize.  This makes the business credit card a much faster option.

Then there’s the paperwork – and much less of it with a business credit card.  Loan and line of credit applications require a lot of documentation including credit reports, tax returns, financial statements, and legal papers.  For business credit cards you’re more likely to be asked verbally for information about your business making the process much less cumbersome.

Access to Ongoing Credit

A business credit card gives you revolving credit.  You’re given a credit limit, which is the maximum spending amount that you can spend against repeatedly. The credit limit is always there when you need it so long as the monthly repayment terms are met. If you pay your balance owing in full every month, you’ll avoid paying the interest charges associated with that business credit card.

While lines of credit offer a similar revolving credit option, there’s no way to avoid additional interest charges associated with the repayment terms. The credit amount is always available but once you start spending from that line of credit, interest charges start accruing immediately.  

With loans, you are borrowing a fixed amount that is paid back with interest over a set period of time.  Once the loan is repaid, you’ll have to go through the tedious application process again to obtain additional funds for the business.

Stay Collateral Safe

Secured lines of credits and loans require collateral in order to qualify. The borrower will need an asset, such as a piece of property, as a guarantee that the loan will be paid.  In the unfortunate event, you’re unable to pay back the loan, the borrower can seize the asset and use it for proceeds to pay back the debt.

Most business credit cards are unsecured and don’t require collateral.  Approval is based on credit worthiness and, if approved, you’ll be asked to sign a personal guarantee agreeing to pay any outstanding balances.  While business credit card interest rates tend to be higher, you won’t have to put up collateral.

Build a Solid Credit Rating

Business credits cards are a great way to build a business credit rating. Paying off monthly balances, making minimum payments, and not going over the credit limit are simple ways to building up a solid credit report.  You’re also more likely to qualify for increased credit limits and additional credit options.

Simplify Payments Online  

Today’s businesses are online, and credit cards have made transacting with clients and paying vendors simple and convenient. There are even account payable platforms, like WayPay, that will combine all funds available from your credit cards and bank accounts into one account. They let you pay suppliers, contractors and employees all from one location, at a cost that’s lower than regular bank fees; and that saves your business time and money.

Earn Rewards, Perks and Cash

Let’s not forget about rewards.  Many business credit cards offer great loyalty programs.  By simply using the card, you’ll earn reward points that can be redeemed for travel, products, services, events, and even cash.  There are many different rewards programs so be sure to get the business credit card that works best for you and your business.

If you’re looking for business credit that you can get quickly and easily, without the paperwork and collateral requirements and give you flexible payment options and rewards, then a business credit card might just be what your business needs.

Disclaimer

The information in this article is for educational and information purposes only and should not be relied upon for decision making. Always seek the expertise of a professional advisor or accountant prior to making any decisions.

Robert Bast

Robert is a proven strategic business leader with 18 years of experience in the financial and technology services industry. During his career, Robert has worked at several major banks and credit card networks and has helped to launch business strategies and products both in Canada and around the world. He has consulted with hundreds of small businesses, large market organizations, and enterprise companies on topics ranging from simple payment optimization strategies to account reconciliation and payment process re-engineering plans. As Chief Revenue Officer and Co-Founder of WayPay, he is responsible for the development of key partner strategies, go-to-market and growth plans, and a positive customer sales and acquisition experience.