By Rich Best

Many people would have a difficult time managing their finances without credit cards, and small businesses that need to cover short term shortfalls and manage their cash flow are no different. And, it’s important for small businesses to establish credit so they can have access to the financing needed to expand. When used effectively, a business credit card* not only becomes an essential cash management tool, it helps the business establish itself as a legitimate member of the business community. Here are some additional reasons why a business credit card is essential for small business owners:

  • Helps keep personal and business finances separate: If you want to really annoy the IRS or your accountant, just try presenting them with your business records that also have a lot of your personal expenses mixed in. It's one of the quickest routes to an audit, and it can only complicate your life.

  • Flexibility, control and convenience: In today’s web-wired world it’s nearly impossible not to use the Internet to make at least some purchases, so you need a credit card. And, you never know when an advantageous purchase opportunity might pop up. Having a business credit card will ensure your business makes purchases efficiently, and it will enable the business to better control expenses, especially with employees.

  • Cash flow management: Making purchases with a business credit card enables the business to keep cash flow working in the business throughout the billing cycle. Payments can be timed to customer receipts. And, because credit card accounts provide daily transaction records and monthly spending breakdowns, it’s much easier to manage cash flow.

  • They can be very rewarding: Most small business credit cards have cash back and travel rewards programs that can truly reduce the business’ outlay for supplies, equipment, and travel. Reward points are typically higher on business-related purchases such as supplies and travel, so they can be used right away to reduce business costs.

  • Give your business some credit: When you do need to go to the bank for extended financing, it will look at both your personal credit history and your business credit history. A business credit card is the quickest way to build a credit history for your business.

Many banks have been offering small business credit cards for a while. Many business users, though, have found that they can be somewhat limiting in the benefits they offer and they tend to charge higher APRs. More recently, banks have been raising the bar on their business credit card features, benefits and rewards as they compete in the growing small business market. Some banks now combine a business credit card with online banking solutions that can streamline expense management and accounting for small businesses.

If your business credit history is short or your credit is less than excellent, you can look to banks that offer a range of business credit cards for different levels of credit standing. You may end up getting a business credit card with a high APR interest rate; however, if you manage your cash flow well, and pay off the card in full each month, it shouldn’t cost you any more than the annual fee.

*Click here for more information on business credit cards from Nevada State Bank.

Rich Best has spent 28 years in the financial services industry, as an advisor, a managing partner, directors of training and marketing, and now as a consultant to the industry. Rich has written extensively on a broad range of personal finance topics and is published on several top financial sites.


The information provided is presented for general informational purposes only and does not constitute tax, legal or business advice. Any views expressed in this article may not necessarily be those of Nevada State Bank or its affiliates.