Cash flow can be tricky for small business owners. There’s a lot to balance, especially if you’re a young organization and don’t have large or stable revenues. Many small business owners turn to credit and borrowing options to ensure they can access funds to support building their businesses. One of the most popular credit options is getting a small business credit card, which is rapidly becoming an essential part of any small business toolkit.

There are a range of benefits to using a business credit card and a few potential downsides. In this article, we’ll look at what a business credit card can be used for and whether it might be right for your business.

What is a small business credit card?

Business credit cards are essentially the same as the personal credit cards many of us use to make payments easier and get access to a line of credit. A small business credit card is a similar tool, but it would be registered to your business rather than personally. This means that you can keep your business and personal expenses separate. Otherwise, it will function like any other credit card, allowing you to spend up to the agreed-upon limit. You can stay on top of your account with monthly payments or pay it off in full.

When it comes to small businesses and start-ups, 38% of failing companies state lack of funds as a major reason why they had to close, demonstrating how vital it is to have access to lines of credit. Business credit cards are a quick way to get access to funds for paying contractors, handling petty cash purchases, or dealing with business expenses for employees.

 “Business credit cards offer more than just access to additional funds – they can streamline processes and save you valuable time. Whether it’s funding employee business trips or purchasing office supplies, having a business credit card simplifies the entire transaction process. Instead of a time-consuming reimbursement process, the card provides a quick and hassle-free way to cover expenses on the spot.”

Damian Brychcy, COO and US MD of Capital on Tap

Benefits of a small business credit card

There are many significant benefits to using business credit cards.

Rewards and perks

Most credit cards offer you cashback or other perks. These might include air miles, reward points, or other bonuses that can be redeemed. There are plenty of options for you to find a reward that is useful for your business. Cashback can make a significant contribution to your bottom line, and rewards can help mitigate some business expenses.

Separating personal and business finance

While you’ve probably put some of your own money into getting your business running, it’s important to keep business and personal expenses separate. This will help you keep better track of what’s been spent and where.

Spending flexibility

Credit cards are generally accepted almost anywhere, so you can use this line of credit to pay contractors, buy items in shops, make travel bookings, and more.

Employee cards

Having one credit card account means you also have employee cards for your employees – or at least, the employees who need them. This saves the hassle of giving people cash, risking someone being without a payment method for business transactions, and then later eliminates the time-consuming reimbursement of expenses.

Introductory periods

Many credit cards will come with an introductory offer, such as reduced interest, which can be a vital benefit for your business in its early days.

Payment protection

Credit cards often feature payment protection. This can be a real boon if a vendor doesn’t supply what you pay for, and can prevent your business from losing money.

Drawbacks of a small business credit card

Of course, there are also downsides to business credit cards. One of the biggest ones is the risk of damaging your business credit score if you fail to make payments on time. You’ll also pay interest on your balance, as well as fees if you pay late.

“Credit cards are a great tool for businesses, but only if you use them wisely. Ensuring timely payment of your balance, or meeting your minimum monthly payment is essential. Payments will be tracked in your credit score, and if you miss any payments, this could hinder your business’s ability to secure future loans or credit cards.”

Damian Brychcy, COO and US MD of Capital on Tap

Small business credit cards: Conclusion

With over 5 million new US businesses started in 2022, and even more opening in 2023, it’s no wonder that business credit cards are becoming more common. They can be a reliable and straightforward way to access funds for the day-to-day expenses of running a company. As long as you make your payments on time, a credit card can provide access to needed cash, while providing company benefits such as cashback and payment protection.