Business secured credit cards are a particular type of credit card that give you the flexibility of a business credit card due to their wide acceptance and are relatively easy to open an account, because of the security given.
The secured aspect will also mean that any adverse credit history is not an issue, and because you can’t spend more than you can afford will give you peace of mind and stop you over reaching yourself.
Small Business Credit Card
Having said that, getting a small business credit card is so easy these days that it almost happens by accident. Within the first week after your business is registered your mailbox will begin to fill with offers for small business credit cards, and the offers may already be too late if your business bank manager gave you a credit card already.
Credit cards are no longer exclusive to banks. Specialist credit card companies, affinity groups, and investment firms are also out for your money. This fierce competition means that there are many different offers. Interest free introductory periods, balance transfers (yes, even on business cards), reward programs and generous credit limits are not uncommon.
What they should really come with is a “small business owner beware” sign because, just as in personal finance, credit cards can wreak havoc with unnecessarily high expenses.
The credit card companies buy your business by offering short term incentives such as an interest free period, because they know, when the offers expire there will be a significant proportion of new customers paying substantial interest on outstanding balances to make them fat profits.
If you’re not careful, your business credit card will replace a small business line of credit that you should have negotiated with the bank. It may be more difficult to get a business credit line in the first place, and even when achieved, a bank’s loan covenants may seem restrictive.
The rules put in place by a bank on a line of credit, however, will help you to adopt good business practices. Credit cards have no rules when it comes to things like maintaining business performance levels which safeguard your business, such as cash flow and asset levels.
There is an important role for small business credit cards in your business. Use them for purchases, and pay the balance in full every month to build your credit rating. If you want to grow your business then make sure you do it with an appropriate source of business finance. A credit card is not an appropriate source to fund growth.
What card should you choose? A small business does not need any unnecessary expenses (does any business?) so stay away from annual fees that might offer an extra thirty days to pay. These rarely prove worthwhile. If you cannot afford to pay your balance in full, then it is better not to use one, than pay the expensive interest charged on outstanding balances.
Reward schemes may be appropriate when you are using your business credit card in such a way that you pay the balance in full every month. Then you should be entitled to a little bonus. Generally, cards that offer rewards will have higher interest rates.
Small business credit cards are excellent for employees that travel or whom need to entertain as part of their job function. Controlling expenditure limits can be tricky, so look out for schemes where it is possible to set individual card limits, or use a secured credit card for business, and pay down a fixed monthly budget as security for each individual.
Business credit cards for employees need special attention. Make sure you have a written policy in place, and make sure the employee knows they are liable for any unauthorized expenditure. Consider taking out insurance for fraudulent or negligent use.
Small business credit cards are a great way to start building a track record and hence credit rating with your bank, but a business secured credit card is an even better way to make sure your employees have flexibility in their spending options, but you have control over the budget, without any of the associated risks of abuse