Having a credit card to use for business expenses makes sense, and yet it’s something that many business owners overlook. Some prefer to pay in cash, while others are simply unaware of the benefits of having a business credit card.
A secured business credit card offers protection for both you and your lender. Many of CFE’s business members come to us wanting to know how to establish positive credit for their businesses. Applying for a secured business credit card is a good way to do that without acquiring more debt than you can handle.
With that in mind, here are five benefits of getting a secured business credit card.
#1: A Secured Business Credit Card Can Help You Build Business Credit
If you have a new business or have been paying for everything in cash, you may run into difficulties if you want to buy raw materials or inventory on credit. Paying in cash shows you only buy what you can afford, but it doesn’t demonstrate your ability to handle terms and pay in a timely manner.
A secured credit card is guaranteed by your deposit. By making regular purchases with your card and making on-time payments, you can establish that you are a good credit risk. In the long run, that can help you qualify for trade credit and may even help you qualify for a bank loan or line of credit.
#2: Secured Business Credit Cards Are Low Risk
The next thing to know is that a secured business credit card comes with virtually no risk to you or your lender. Because your card is secured by a deposit – usually equal to the amount of your credit limit – you won’t need to worry that you’ll spend more than you can afford. In the worst-case scenario, your lender will use your deposit to pay your outstanding balance.
Secured business credit cards are very easy to acquire. Even a lender who might not be willing to give you unsecured credit may be willing to help you by granting you a secured credit card to use for your business expenses.
#3: Secured Business Cards Make it Easy to Buy Online
Many business owners find it convenient to order basic supplies online. They can take advantage of online discounts, order at any time of day, and pay with the push of a button.
Your secured business credit card is something you can use to order office supplies and other necessities. Depending on your credit limit, you may also be able to use it to order raw materials from your suppliers or buy inventory. In other words, a secured credit card gives you buying power and convenience at the same time – two things that every business owner wants.
#4: Secured Business Credit Cards Keep Your Business Expenses Separate from Personal Expenses
One of the most common mistakes business owners make, particularly those who are Sole Proprietors or single-member LLCs, is combining their business and personal expenses. Not only can combining expenses be confusing for you personally, it can also lead to trouble with the Internal Revenue Service if you’re not careful.
A secured business credit card can be used for all of your business expenses. Because it’s a separate account, there’s no risk that you’ll confuse it with your personal expenses. You can even link the card to your business bank account and set up automatic payments, so you can establish good payment habits on behalf of your company.
#5: Authorize Employees to Buy on Your Behalf
A secured business credit card is something you can use as a business owner, whether you choose to charge your business supplies or stock up on inventory before a sale. You can also use it to entertain customers, pay for marketing expenses, and handle any business expense you choose.
One of the nice things about having a secured business credit card is that you can share some of your buying power with your employees. Many lenders will allow you to have multiple cardholders. You can issue cards to employees with separate spending limits, enabling them to pay for routine expenses like gas, meals, and travel.
Keep in mind, too, that some secured business credit cards come with the same perks as regular credit cards – things like cash back rewards and mileage. It’s a good idea to look for a card that offers a reward system that you know will be useful to you and your employees.
Establishing good credit for your business is a must if you want to grow and succeed. Applying for a secured business credit card can help you demonstrate your creditworthiness and work toward the future your company deserves.
To learn more about CFE’s secured business credit cards, please click here now.