If you have a small business or a home business you may be considering getting a credit card in the name of your business. There are quite a few benefits to having a small business credit card including making your accounting and tax-time easier and helping out with any cash-flow issues. While having a small business credit card is not a necessity, it can be very helpful.
The first benefit of having a credit card for your small business is that it will help you to keep your business charges separate from your personal charges. Many small business owners make the mistake of charging items like hotel reservations, airline tickets, supplies, equipment and other business expenses on their own personal credit cards and then reimbursing themselves from their business funds. This can become very confusing at tax time when you are trying to sort out your business expenses to see what can be deducted and what can’t.
If you have a business credit card that you can use exclusively for purchases for your business that require a credit card, all of your expenses will be located in one place. All you need to do is go through your statements from the credit card issuer to see your expenditures and decide what is deductible and what is not. Tracking your expenses can either be done with your monthly statements or by getting a year end record of all your transactions. Some small business credit cards even come with their own software that makes tracking expenses even easier.
Besides making your accounting easier, a small business credit card can be a good first step in helping your business to establish credit. You never know when an opportunity may present itself for you to grow your business, and you may need to take a loan to do that. By being proactive and working to establish good business credit now you can be better prepared to get a loan for your business in the future. Business credit reporting bureaus collect information about your business that is similar to what is collected by personal credit bureaus including your payment history, how long you have had your accounts and more. The major business credit reporting bureaus are Dun & Bradstreet and Business Credit USA.
Having a small business credit card can also be a blessing for helping to cover unexpected expenses that come up in your business. You may need to replace equipment that breaks, buy supplies, or pay for a terrific marketing opportunity that you just can’t pass up. Having a business credit card can make it possible to do these things even if you don’t have the cash on hand to cover these unexpected expenses.
Just like with personal credit cards, business credit cards should be used responsibly. A business credit card can not only reflect poorly upon your business if used incorrectly, but it can also have a negative effect on your personal credit. However, if used responsibly, a business credit card can help your business in many ways.