Using Business Credit Cards to Fund Your Company
Overview of Business Credit Cards
Business credit cards function similarly to personal credit cards, but they offer some key advantages:
- They don’t require a personal guarantee – With a business credit card, you won’t need to put your personal assets at risk like you would with a business loan. The card is backed by your company’s ability to pay.
- Fast access to funds – Business credit card applications can often be approved within minutes, providing quick access to financing. Initial credit limits may start around $500 – $5000.
- Flexible spending – Use your business credit card for virtually any business purchase like inventory, supplies, software, marketing expenses, etc.
- Rewards – Many cards offer robust rewards programs on categories like office supplies, tech purchases, advertising, or shipping. These can help reduce business expenses.
Building Business Credit
Before applying for a business credit card, you’ll want to start establishing business credit under your company’s name. Here are some tips:
-- Open a business bank account and use it regularly for deposits/payments
- Apply for a business phone line or other recurring service in your business name
- Seek vendor accounts with companies like Uline or Grainger, making on-time payments
As you build a record of on-time payments over 6+ months, you’ll begin generating a business credit profile, making it easier to get approved for cards. Apps like Nav can help monitor your business credit.
Top Business Credit Card Options
Here are some of the most popular business credit cards to consider:
Chase Ink Business Cards
Chase offers three Ink Business cards with large signup bonuses ($750 – $1000) and various rewards categories:
- Ink Business Unlimited – 1.5% cash back on every purchase
- Ink Business Cash – 5% back on internet/phone/cable bills (up to $25k in combined purchases per account anniversary year)
- Ink Business Preferred – 3x points on shipping, internet/cable/phone services, advertising purchases on social media sites and with search engines, and travel
American Express Blue Business Plus
The Blue Business Plus card from American Express offers 2x Membership Rewards points on every purchase up to $50,000 per year, with no annual fee. Points can be redeemed for cash back, travel, gift cards, or transfers to airline/hotel partners.
Capital One Spark Cards
Capital One’s Spark cards cater to all stages of business growth with options like:
- No preset spending limit
- 2% cash back on every purchase
- $500 – $2000 sign up bonus
- Perks like extended warranties and travel protections
Be sure to choose the Spark card that aligns with your business expenses and redemption goals.
Using Business Credit Cards Strategically
When used properly, business credit cards can provide financing and rewards to help grow your company. Here are some best practices:
Pay off balances monthly
By paying your bill in full each month, you avoid interest charges which saves money. Set payment reminders and automate them if possible.
Use cards for larger purchases
Consider using business debit/checks for smaller recurring expenses like subscriptions and utilities. Use your credit primarily for larger purchases eligible for rewards.
Split expenses across cards
If you have multiple business cards, divvy up expenses to maximize rewards in different categories like gas, shipping, advertising, etc.
Set spending limits
Treat your credit card more like a debit card, by setting a monthly spending cap aligned with your business’s cash flow so you don’t overextend.
Review statements closely
Scrutinize each transaction to catch unauthorized charges early. Having a separate card just for your business makes this easier.
Financing Major Purchases
Once you have established some credit history under your business name, you can take advantage of 0% APR introductory offers many business cards provide on new purchases and/or balance transfers.
This makes financing major purchases easy and affordable, while allowing you to conserve cash or use money that would go toward payments for other investments.
For example, if facing a $10,000 equipment purchase, you could transfer the balance to a card with a 0% rate for 12-18 months. This would allow you to pay it off slowly over time rather than tapping business funds or savings.
Summing It All Up
Getting a business credit card early on provides a convenient way to access extra capital, earn rewards, separate expenses, and establish business credit. Be diligent about payments and limiting balances, and your company credit profile will continue to expand – enabling cards with higher limits, lower rates, and better rewards.