Beyond being a simple payment tool, your business credit card may be a great addition to your business’ toolkit. Business credit cards can help you run your business more smoothly by giving you more flexibility over your cash flow.
Here are six ways a credit card designed for business can work hard for you:
1. You Get an Interest-free Grace Period.
Typically, business credit cards (similar to personal credit cards) come with a 15- to 30-day grace period between your purchase date and your payment date. This lets you hold on to your cash longer. With a repayment period like this, you gain some flexibility in terms of how you can use your cash in hand.
2. No Need to Tie up Your Personal Credit.
You need your personal credit card for personal purchases. When you start to layer on business expenses, that credit card can become over-stretched, cutting into both your business and your personal cash flow. A business credit card gives you an additional payment device to leverage — and separating your personal and business credit card expenses can help out a lot come tax time. You won’t have to sift through your personal credit card statements looking for your business expenses, as they’ll already be separated for you.
3. Pay Your Suppliers Faster.
When you can pay with a credit card — rather than employing your staff or bookkeeper to cut a cheque and drop it in the mail — you’re able to pay your vendors faster (and with that grace period you don’t need to wait to get paid before you settle up). Consistently paying quickly can also help your vendor relationships – the good will you build up may let you negotiate better pricing or secure a rush job.
4. You’ll Build a Credit History for Your Business.
By using your business credit card regularly and making monthly payments on time, you’re on your way to establishing a positive credit rating for your business. Should you need a business loan or line of credit in the future, this credit history can come in handy.
5. Perks and Points.
Many business credit cards come with rewards programs, such as such as the Avion Visa Infinite for Business, giving you the opportunity to earn points for things like travel, merchandise, gift cards, cash back and more. Think of the rewards as cash in your pocket, which you can use to reinvest in your business. Using points to purchase supplies or equipment, reward employees, or attend an out-of-town conference or trade show can give your business a boost while freeing up valuable cash.
6. Get a Picture of Your Spending.
When you use a business credit card for all your business purchases, you can see — all in one place — how and where you’re spending your money. Many cards come with analytics tools to provide in-depth insights into your spending patterns and expenses. Depending on the size and scope of your business, even a simple review of your statement can give you a helpful view into the ongoing costs of running your business. When you have this kind of information on hand, you’re in a better position to evaluate your spending decisions, determine where you can save money, and potentially keep more cash in your business.
Just remember, your business credit card is a payment tool to cover short-term expenses; large capital expenses should be funded separately. A rolling balance on your card could result in high interest payments — interest payments that might cut into the profits of your business. If you’re looking for a bigger pool of credit for large or long-term expenses, there are a number of options you can consider. Term loans, equipment loans and lines of credit offer specific uses and benefits to help you manage and grow your business.
Ultimately, a business credit card can help you manage your cash flow efficiently, while giving you the opportunity to enjoy perks and rewards as you cover your necessary business expenses. Offering freedom and security, a business credit card can be a great addition to your business’ toolkit.
Compare cards based on your business needs
More from the Entrepreneurs in the Garage series:
This article is intended as general information only and is not to be relied upon as constituting legal, financial or other professional advice. A professional advisor should be consulted regarding your specific situation. Information presented is believed to be factual and up-to-date but we do not guarantee its accuracy and it should not be regarded as a complete analysis of the subjects discussed. All expressions of opinion reflect the judgment of the authors as of the date of publication and are subject to change. No endorsement of any third parties or their advice, opinions, information, products or services is expressly given or implied by Royal Bank of Canada or any of its affiliates.