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Start-Up A Small Business Credit Card

By Chris Gunnels

Getting a bank loan for a small business may take months and the interest rate may be the same as for a small business credit card anyway.

To fund a new business or a temporary cash injection for an existing business, your best choice may be a 0% balance transfer business credit card. With a 0% introductory annual percentage rate, these cards effectively give you an interest-free loan for as long as 12 to 15 months; most banks won't offer commercial loans at that rate for that period.

As your revenues start coming in, you can repay these inexpensive lines of credits before they convert to higher interest rates. Once you establish a regular payment history with the card issuer, your credit line will likely increase, giving you even greater financial flexibility, and your interest rate will decrease, giving you more options for credit.

An accountant may need to read the fine print, though. Some cards only give the 0% rate for balance transfers, while others will only give it for new purchases. Also, be careful not to make a misstep, such as a late payment, which could trigger a higher rate, so if you don't have an accountant or book-keeper, you need to get on top of this yourself. If you're transferring a balance, be alert of the cost of transaction fees.

Cash flow issues are one of the most common causes of small business failure and closure. At any point in the life cycle of your business, you are likely to need access to inexpensive working capital for any reason. A small business credit card will give you access to an affordable, unsecured line of credit to help you afford equipment and inventory purchases or give you cash when needed. Increasing your working capital in this way can greatly enhance your chances of long-term success and avoid the pitfall of cash flow issues. It's also a great back-up plan to have a card handy for emergencies.

Look for cards that offer additional perks -cash back rewards, travel-related rewards, and free expense reporting. If you will need to use the credit line on the card to help manage your cash flow, be sure to choose a card that provides a low fixed APR once the introductory period expires, or be sure to pay on time monthly. Many cards come with attractive 0% introductory rates, but these often expire after 12-15 months. Some cards also offer very attractive fixed APR after the introductory period, as low as 5%, which is comparable to a bank loan. If you plan on using your card on an ongoing basis to manage your cash flow, choose one of these cards over a high-interest rate rewards card.

Use a small business credit card to help manage and control expenses for your business. Most cards offer free expense reporting, which automatically sorts your purchases according to category, giving you an easy overview of what your main business expenditures are, and making sure to reduce wasteful spending. Some small business cards also give you the option to download your statement into business accounting software, such as Quicken or Quickbooks. OPEN: the small business network from American Express allows you to do this their platinum business card. This not only simplifies your book-keeping, it also gives you a tool for monitoring your expenses on a more frequent basis, so you don't wind up with surprises at the end of the month, or overages.

You can request additional cards for employees. This is particularly useful if you have many employees, as it enables you to consolidate your business expenses into one account, yet know what each one individually charged for. Your monthly account summary can be broken down by employee, category of expense, time and date. This bypasses the need for employees to write up monthly expense reports and send in invoices for reimbursements, saving your business tedious and expensive paperwork! Its also possible to use your card in conjunction with expense reporting software to enable employees to view and approve charges before submitting them online for purchase.

These features come free with your card. No matter the size of your business, a small business credit card provides you with greater flexibility in managing your company\'s expenses.

Published: Wednesday 22nd of October 2008 11:53:28 AM

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