As the saying goes, “you’ve got to spend money, to make money.” There are few instances where this statement is more relevant than in business.
That’s where business credit cards come in.
While at first glance, using personal credit cards may seem the obvious option—especially if you’re operating a startup or small business—corporate cards offer myriad benefits that make them a better alternative for your business. While there may be different types of credit cards to choose from, a corporate card offers a number of perks for business owners. A business card can help you:
- Separate your work expenses from your personal expenses
- Grant you more financial flexibility
- Give you more control and visibility
- Earn you rewards for your business
- Establish a business credit history
1. Business Cards Separate Your Finances
One of the greatest benefits of business credit cards is that they allow you to separate your finances and stay organized. Separating your personal and business assets is crucial to protecting your financial wellbeing on both fronts.
Using a business credit card for your business expenses not only lets you maintain this separation, but also gives you access to valuable features that are unique to corporate cards. Depending on the card, you can extend your business line of credit to your employees, view your finances with more advanced analytics software, and automate certain processes as the business owner.
The separation of assets and addition of business-specific features enable you to:
- Preserve the liability protections granted to you when you register as an LLC or a corporation. When you use a single card for both personal and business expenses, these protections go out the window.
- Simplify your recordkeeping to keep both sides of your finances more organized.
- Keep your personal and business debt separate to avoid hurting either credit score or losing personal assets should they be used as collateral.
- Avoid confusion during tax season by keeping your personal and professional finances sorted.
- Streamline (or even eliminate) the reimbursement process by dishing out corporate cards to your employees. No longer requiring them to pay out of pocket on behalf of the business increases workplace satisfaction and decreases paperwork. It’s a win-win.
2. Business Cards Give You More Flexibility
Credit cards provide you with a revolving line of credit, allowing you to make the essential purchases you need to grow your business and expand your reach. However, the amount of capital needed may surpass your available line of credit on a personal card.
Fortunately, business credit cards offer far higher credit limits than personal cards. This gives you greater spending power and fewer capital restrictions.
However, not all credit limits are determined in the same way. Be sure to confirm the terms of your credit limit before selecting the best business credit card for your company.
3. Gain More Visibility and Control
A good personal credit card will come with monthly account summaries and possibly some light analytics software. While that’s great for someone who wants to save up for a new car or spend less on takeout, these accounting features are inadequate for a thriving business owner.
Most business credit cards come with a rudimentary form of accounting software that grants you far more financial visibility, automation, and control than your typical consumer card. But the best small business credit card comes with expense management and accounting software built right into the platform.
These systems allow you to:
- Reduce manual processes by automating expense management and accounting reconciliation, making the expense report process a breeze and letting you close the books faster.
- Circumvent human error and fraud by automating expense approval and validation, and maintaining a thorough, searchable record of past expense reports.
- Reduce expense report exceptions by easily identifying noncompliant or fraudulent employee transactions.
- Improve insights on your financial performance and identify growth areas.
- Reduce overspending with certain vendors and eliminate redundancies, like duplicate SaaS subscriptions.
When you put a finger on the pulse of your finances, you control where the money flows.
4. Earn Rewards for Your Business
Rewards programs aren’t limited to personal cards. But with a small business credit card, they function a bit differently. Corporate cards typically offer rewards and perks that are more specific (and more beneficial) to businesses.
These business credit card benefits include:
- Points, miles, or cash back programs that reward common business spending like travel, office supplies, and SaaS subscriptions.
- Enticing signup and anniversary bonuses that give you an instant boost.
- Partner card programs that offer merchandise or service discounts in tech, entertainment, shipping, advertising, business travel, and more.
- Simple cash back programs that grant you direct value back on some of your purchases. The best cash back program gives you cash back on all your purchases and applies the cash back to your next month’s bill.
While the grocery and gas rewards your consumer card may offer are great for your day-to-day, business-specific rewards programs are ideal for your enterprise, especially over the long term.
Extra Tip: When comparing cards with different rewards programs, be sure to familiarize yourself with these aspects of a rewards program before choosing the business card for you:
- Redemption terms
- Spending limits on rewards
- Redemption limits on rewards
- Cash back terms
- Actual dollar value of points or miles
5. Establish a Business Credit History
Scaling is an important part of business growth. Whether it’s your inventory, workforce, production, or web presence, you need to invest money into crucial resources that push your business to the top. And for most business owners, that surplus money isn’t just sitting around in a bank account.
That’s where loans come in. They allow you to purchase materials, property, equipment, or hire more employees as a small business owner.
To have your small business loan accepted (and to avoid sky-high interest rates), you need to have an established business credit history and a strong commercial credit score.
According to the U.S. Small Business Administration, “Insufficient or delayed financing is the second most common reason for business failure.” They also note that businesses with poor commercial credit scores are more likely to get rejected for loans—and, if they do get accepted, their interest rates skyrocket:
- 12% – Average percentage that top national banks will increase loan interest rates from the usual 8% due to poor credit scores or credit histories.
- 19% – Average percentage that these banks will increase credit card interest rates from the typical 9% due to poor credit scores or credit histories.
An easy way to grow your business credit score is to spend using a business credit card or charge card. Even if the rewards or convenience of a personal card seem alluring, they’re not worth losing out on crucial loans that can help you scale your business down the road.
Take Your Business Further with Ramp
While hard work, a solid business plan, and courage are critical ingredients of business success, a business credit card is a must-have tool to help get you to the finish line.
If you’re unsure how to deal with convoluted reward programs and sky-high interest rates as a small business owner, then Ramp can help. Ramp is the only corporate card with a straightforward 1.5% cash back program and built-in expense management software.
With Ramp, you can:
- Eliminate manual bookkeeping processes.
- Accelerate the reconciliation process by automatically matching receipts to purchases.
- Instantly provide employees with virtual (or physical) cards catered to their spending needs.
- Set dynamic controls on each of these cards.
- See your company finances in real-time, allowing you to eliminate redundant expenses and increase savings.
Look to us for a corporate card program that’s as simple as it is satisfying.
SBA. Why small businesses should manage their business credit. https://www.sba.gov/sites/default/files/articles/oee_5_simplesteps_brochure_managing_your_credit.pdf
The Balance SMB. Reasons to Take out a Business Loan. https://www.thebalancesmb.com/four-reasons-to-take-out-a-business-loan-393255