You have a great new idea for your business. You have put all the basic research that you need into it, and you’ve determined that the idea is a winner. The only hiccup that you may face is finding adequate financing. With a new idea, how do you find financing through the traditional ways?
More so now than ever before, the answer to the problem of financing a business comes down to business credit cards and charge cards. By the year 2022, spending on small business credit cards will go over half a trillion dollars. This number is only set to rise, because new solo entrepreneurs seem to prefer credit cards. At this point, they use personal credit cards a great deal for their rewards and consumer protections. As business cards begin to gain many of the benefits of personal cards, switching to them should come easily.
If you’re considering applying for a business credit card, here are the top benefits that these cards come with.
1. They Give You Effortless Access to Credit
The big banks are always reluctant to lend to small businesses that do not have a proven track record. They do willingly offer credit cards to such businesses, however. If you aren’t an established business, applying for a business credit card is your easiest way to find funding.
2. Your Business Continues to Be Your Own
When you get funding for your business needs through your credit cards, you don’t need to turn to shareholders for additional funding and give a share of your company away in return. You retain all your company’s capital, and control, as well.
3. Future Financing Becomes Easier
When you use a business credit card on a regular basis, you help build your company’s credit profile. When you need lenders to lend to you down the road, they’ll have a far easier time doing so, because your credit card borrowing and repaying have built up your business credit score.
4. You Get to Track Your Expenses Better
When you are in the process of implementing a major business plan, you need to be more careful with money than ever before. If you are concerned about keeping track of every dollar that you spend, a credit card can be very useful. You get an itemized spending bill each month, that allows you to see exactly where your money goes. You should be able to catch any spending trends that you should worry about.
5. You Get to Manage Your Cash Flow
Small businesses often get into trouble over temporary cash flow problems. If you have bills lined up, but not enough money at the moment, your business credit card can come in handy helping take care of those bills. You get to repay those credit card expenses when your cash flow begins to settle down. It’s important to remember, however, that using credit cards costs you interest. If you always seem to have cash flow problems, it doesn’t make sense relying on a credit card then. You wouldn’t be able to pay back what you borrowed.
6. You Can Use Your Credit Card for Large Purchases
Most cards allow interest-free periods on purchases. When you need more inventory to help with a large order that you need to fulfill, or you need new equipment to run your business with, buying with a credit card can be an interest-free way to gain financing for such expenses. As long as your spending doesn’t have you going right up to your spending limit, using your credit card for large purchases makes sense.
Business credit cards can be an excellent financial buffer for small businesses just starting out. When you have instant access to credit, it makes running the business much easier. You only need to remember that credit cards are an expensive way to borrow, and you should only spend with them if you know exactly when and how you will repay your balance.
If you’re sure that a business credit card can help you, you need to begin research to find the best product for your needs. There are cards out there that come with reasonable annual percentage rates or APRs and great rewards. There are also ones that charge you no annual fee or fees for ATM withdrawals. It only takes a little homework to locate the right product for your needs.
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This has been a JBF Business Media production.