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6 Reasons Why Every Entrepreneur Should Have a Business Credit Card

It's hard to cover all of your expenses as a successful entrepreneur


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Is it even possible to count the expenses that come with running a business? You likely have multiple spending areas to cover: a lease on an office or retail space, payroll, bookkeeping costs, supplies and services, inventory — and probably much more.

It’s hard to cover all of your expenses as a successful entrepreneur, but especially anxiety-inducing before you’re generating steady revenue. You need capital to keep your business going, and when you’re just starting out, finding substantial financing is difficult. Small business term loans are an excellent option for many business owners, but they’re often granted to business owners with at least a few years of experience, good credit and proven profitability.

In order to give yourself and your business more financial wiggle-room — especially in the beginning — you should definitely apply for a business credit card. Although you can technically use a personal credit card to finance your business, mixing personal and business credit could be dangerous for you personally.

Here are six major reasons why every entrepreneur can benefit from a business credit card:

1. ESTABLISH + BUILD BUSINESS CREDIT

Business credit and personal credit are different. And if you’re just starting out as a business owner, you’ll want to build your business credit history to make sure you’re in a good position to score the best rates on other business financing when you need it.

Combined with solid business financials, a great business credit score could mean getting approved for a large, low-interest loan with a longer term — a much less expensive product than others available. Before you get there, though, you’ll need to prove to a lender that you can handle smaller lines of credit, like a business credit card.

By opening a business credit card account as early as possible, as well as using it regularly and making payments on time, you’ll gradually build to a good credit score. A high score can help open doors in the future of your company. That’s because two of the main factors that contribute to building a good business credit score — length of credit history and good repayment history — are both tied up in getting a card in-hand sooner rather than later.

2. SEPARATE BUSINESS + PERSONAL CARDS

There are a million reasons to keep your business and personal finances separate. (Among them: making bookkeeping more efficient and making sure your business has the legal protections it should.) But additionally, separating your business and personal credit helps protect you in case something goes wrong.

Say you use a personal credit card to finance your business, and you can’t repay your debts. Not only do you have a nightmare situation on your hands, but you’ve totally tanked your personal credit score.

A business credit card can allow you to establish business credit separate from your personal credit. You can use the credit card for essentially any business-related purpose. And, as long as you make those payments on time, you’ll watch your business credit score rise.

3. USE IT AS AN INTEREST-FREE LOAN

One of the biggest perks with any kind of credit card is that, if you don’t carry a balance, your line of credit is essentially a month-to-month, interest-free loan.

What do we mean by that? Well, whenever you swipe your business credit card, even if it’s a big purchase, you’re not paying for those expenses right away—you’re only agreeing to pay back your card issuer at a later date. And you’ll typically have a billing period of 30 days in order to make the payment before interest kicks in.

If you strategically time a purchase on your business credit card card at the beginning of a billing period and pay it off at the end of the period, you’ve given yourself the longest amount of time possible to gather the cash before you accrue credit card interest. Of course, you still have to pay your bill in full for this to work. But that can give you a bit more time than paying with cash for certain business expenses.

4. USE A 0 PERCENT INTO APR PERIOD CARD AS AN INTEREST-FREE LOAN

If you like the idea of using a business credit card as an interest-free loan but want more than a 30-day billing period to pay it off, good news. Some business credit cards offer introductory 0 percent APR periods. That means for a specified, limited time — six months, 12 months or even 15 months — you can carry a balance, interest-free.

These cards can be a great way to give yourself an even longer interest-free loan — especially for large purchases that you can’t pay off in that 30-day window, but are sure you can manage to gather the cash for in the introductory APR period.

Be careful to read the fine print, though, to make sure you know when exactly that introductory period ends. When it’s up, a variable APR will set in that’s up to the issuer and contingent on both your own creditworthiness and current market rates. You want to make sure you’ve paid off your full balance by the time the APR hits, or you’ll need to start paying interest.

5. BENEFIT FROM A REWARDS PROGRAM

Why not make your spending work for you? Depending on your credit score, you might be able to qualify for a business credit card that comes with a rewards program. There are lots of rewards programs associated with business credit cards, and you can probably pick one that your business can benefit from directly.

Some provide points that can be used to cover travel expenses, such as airline trips and hotel stays. (And you can use these for business trips, but a vacation might be in the cards, too.) Others offer cash-back incentives so that you earn back a specified percentage of what you spent in a given category, or for flat spending, period.

If you’re diligent about tracking your type of business spending and pick the right card, business credit card rewards can actually help you save money by paying for expenses you would have paid for otherwise, or issuing statement credits. Bear in mind that business cards with exclusive rewards programs are often reserved for borrowers with strong business credit scores. All the more reason to start building your credit.

6. OPTIONS FOR BAD CREDIT EXIST, TOO

If you don’t yet have your business credit score where you’d like it, you haven’t run out of options. Credit card issuers know that small business owners with poor credit need access to credit also, so there are business credit cards for bad credit out there to help.

Often, these business credit cards for bad credit are secured credit cards, meaning you must put down a deposit that acts as both collateral and your credit limit. (You’ll typically receive the security deposit back after you’ve closed the account.) Although that might not sound ideal, it’s a great idea in the end—especially if you both need spending power and you need to improve your business credit score to open up more doors in the future. In that case, they’re a more-than-solid option, and will get you where you need to go.

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