How Opening a Credit Card Can Grow Your Business | Fora Financial Blog
How Opening a Credit Card Can Help You Grow Your Business
December 12, 2017
How opening a business credit card can help you grow your business

How Opening a Credit Card Can Help You Grow Your Business

Having a credit card for your small business can be pivotal to your success. When you have money to expend on inventory, equipment, and advertising, your small business can flourish. Business credit cards fall into two categories: corporate credit cards and small business credit cards. In this post, we’ll discuss which one is right for your business, what you should look for when choosing a card, and how opening a card can boost your business.

Corporate Credit Cards

Is It Right for You?

If your business is making over $4 million in annual revenue, has good business credit, will have 15 or more employees getting a card, and you expect to charge $250,000 or more in a year, you should consider a corporate credit card. The amount of rewards from your annual expenses will add up quickly by the end of the year, and you’ll have a nice sum of cash back rewards or frequent flier miles to use.

What to Look for In a Card

When you’re researching specific cards and their benefits, some factors should be at the top of your list. For instance, you should consider how many employees can hold a corporate card, daily/monthly spend limits, balance payment terms, earning rewards from early payments, and per-card annual cost.

Most corporate cards cannot be opened online. You will have to meet with a banker in-person to establish your account, so consider this during your research as well.

How This Type of Card Can Boost Business

If you’re repaying your balance on-time, your opportunities for rewards are huge. You could receive lower annual fees, cash rebates, and enterprise perks, among other rewards. You may even be able to remove your personal liability from the overarching account.

Because the amount of money that you can spend and invest increases with the large credit advances you get from the card, your card serves as a small business-level financing option.

With two different types of corporate credit cards, business can boom even further with time savings and expanding resources. According to FitSmallBusiness, 2/3 of corporate credit cards are company payment cards, while 1/3 are individual payment cards. In both types of cards, your business will receive the rewards.

Getting a company payment card involves no reimbursement forms, protects the cardholder’s personal credit score, and allows for easier top-level budget consolidation. To save even more time and money, you can set limits on the company level and on a card-by-card basis.

Individual payment cards create a joint liability between the business and cardholder. The employee must fill out expense reports. 58 percent of the time, businesses review their employee’s credit score before issuing them a card. Depending on what you signed up for, your employee could be fully liable for missing payment on their corporate card.

Small Business Credit Cards

Is It Right for You?

If you don’t meet the criteria for opening a corporate credit card, you’ll have to stick with a small business credit card. Unlike most corporate cards, you’ll have to sign a personal guarantee for the account.

What to Look for In a Card

When you’ve chosen the type of card that is best for your business, some factors should be at the top of your list when looking for which card to choose. These factors include daily/monthly spend limits, balance payment terms, earning rewards from early payments, cost to add more cardholders, and account annual costs.

How This Type of Card Can Boost Business

The rewards you earn from your business credit card can be put towards personal use. Use the free perks, like miles, to treat yourself and return to work refreshed.

Although it costs a fee every time you add a new cardholder, creating an opportunity for your employees to spend money on improving the business is fruitful in the long run. With expense reports typically required on small business credit cards, you’ll also have a first-hand look at company expenditure every month.

Maybe you’ve been advised to take out a loan instead; make sure this makes sense for your business. Credit cards don’t require you to put up collateral, unlike some business loans.

Remember to pay your balance on time; your business’s credit score will increase, and you’ll be offered loans and credit cards with less interest and penalties.

Your Bottom Line

Before making any major business decisions, consult your lawyer and accountant to ensure you’re doing the right thing. Also, make sure you’re conducting thorough research. This is particularly important when it comes time to choose which credit card to apply for – you’ll want to consider the benefits each card offers for your specific situation.

Fora Financial

Editorial Note: Any opinions, analyses, reviews or recommendations expressed in this article are those of the author's alone, and have not been reviewed, approved, or otherwise endorsed by any of these entities.

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Fora Financial is a working capital provider to small business owners nationwide. In addition, the Fora Financial team provides educational information to the small business community through their blog, which covers topics such as business financing, marketing, technology, and much more. If you’d like to see a topic covered on the Fora Financial blog, or want to submit a guest post, please email us at [email protected].