Business Credit Cards as a Financing Option

by Gerri Detweiler

Business credit cards are a popular choice among entrepreneurs who have limited business history and don’t qualify for lower-cost financing, such as bank lines of credit. 65% of small businesses use them on a regular basis. Business credit cards are just like personal credit cards, it’s a revolving line of credit you use for business expenses. Just be sure that you’re getting a business credit card and not one tied to your personal credit. Maxing out personal credit cards for business expenses can kill your personal credit scores. But business credit cards can actually help build your business credit profile — as long as you pay your bills on time.

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What You Need to Know About Business Credit Cards

Pros: Cons:
Less stringent approval criteria Higher interest rates than bank credit lines (13% – 25%)
Quick turnaround time Variable interest rates could move higher
Rewards like cash back or 0% intro. interest rate May have annual fee
Interest paid may be tax deductible (unlike personal cards) Limited funding amount (max usually $20,000)
May help build business credit score
Can use for any business need
No collateral required

 

Best Uses for Business Credit Cards:

  • Working capital
  • Every day expenses
  • Short-term revenue generating opportunities
  • Marketing expenses

Nav’s verdict:

It’s always a good idea to have one or two available for short-term emergencies and working capital. Plus, business credit cards are an easy way to start building a strong credit profile in your business’s name. They also make it simple to track business expenses and separate your personal from business finances. That’s something every serious business owner should do right away.

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About Author

Gerri Detweiler

Gerri Detweiler

Credit expert Gerri Detweiler is education director for Nav. She has more than three decades of experience in consumer credit education, has been interviewed in more than 3500 news stories, and answered over 10,000 credit questions online. Her articles have been widely syndicated on sites such as MSN, Forbes, and MarketWatch. She is the author or coauthor of five books, including Finance Your Own Business: Get on the Financing Fast Track. She has testified before Congress on consumer credit legislation.