Anyone with a business, large or small, should have a business credit card. Keeping business credit separate from personal credit is very important. It is one way of providing a layer of protection for the individual business owner, and it also helps the business appear professional and legitimate. But there are lots of other reasons to consider a business card.
In addition, having a separate card makes keeping records much easier. When a business has a dedicated card, separating business expenses from personal expenses is a simple process. Plus, as the card is used, the business will build its own credit history.
Other Benefits of the Card
When a company has a credit card in its name, the business can use the card to make all types of purchases. This includes leasing or buying things like equipment and automobiles for the business or even obtaining land and real estate in the business’s name.
As the card is used, the business continues to build its credit history and its line of credit will grow. This gives the business increased flexibility, as the line of credit can be used when needed.
The business credit account will lessen personal liability on business transactions. In other words, if the business fails and cannot meet its credit obligations, creditors will be prevented from collecting from the owner’s personal assets.
Getting the Card
Some new businesses may find it necessary to weave together personal and business credit in order to get the cards desired. Personal credit history may play an important role in the credit card approval process. Even so, it should be kept in mind that businesses are treated differently than typical consumers.
That is, a small business credit card may very well carry with it higher risks than usual consumer credit cards. For instance, most consumer credit cards offer protection against unauthorized spending up to specified limits. This is usually not the case with business credit cards.
Use the Card Wisely
In most cases, the interest rates on business credit cards are much higher than other funding sources. With that in mind, the cards should be used only after other options have been exhausted. The card should always only be used for business needs.
It’s true that if you have a sole proprietorship, you can run your business efficiently with a personal credit card. However, the goal of every business is to grow. A business that plans for success is always thinking ahead.
Establishing lines of credit under the business name may be one of the wisest moves any company can make. It opens opportunities for the future, which as anyone knows, is sometimes very unpredictable.
Debbie Allen is a freelance writer that writes about online marketing and related topics.
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