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Startup Business

How to Finance a Small Business with a Credit Card

Posted by Jason Olson on Tuesday, February 26, 2019

A business credit card can be a reliable source for small business funding. Read our tips on how to finance a small business with a credit card.

image of a business credit card

The idea of relying on a credit card to help finance your business might seem risky — especially if you are a startup. However, when used responsibly a credit card is a great financial resource for small business funding. In fact, credit cards currently rank as the second most common source of equity for small business owners.

If you are considering applying for a business credit card, it’s important to educate yourself on the benefits and best practices of using a credit card to finance a small business.

Immediate access to a line of credit

One of the biggest benefits of a business credit card is the instant access to revolving credit. You can easily cover temporary cash flow gaps and pay off short-term business expenses without taking out a loan. When a credit card is used responsibly and there is a plan to pay it off each month, you don’t have to worry about paying interest. Whereas with an operating line of credit, you start paying interest on day one until it is paid back.

Credit is available to multiple employees

It’s not uncommon for a business to give a limited number of employees the ability to sign checks and authorize spending. With a credit card, you can give employees access to the card to make approved purchases without requiring them to be a signer on the account. You can also set specific spending limits so employees only have access to a portion of the full line of credit.

If multiple employees have access to the company credit card, best practice is to implement a strategy to monitor usage. This helps lower the risk of embezzlement. It is a good idea to fill out expense records bi-weekly or monthly, so you know what expenses are going through on the card.

Business credit cards provide financial efficiencies

Using a credit card for small business funding can provide you with financial efficiencies that save time and money. For example, if you own a small fleet of vehicles, you can assign a credit card to each vehicle that can only be used at gas stations. By doing this, you will have access to an itemized statement each month for each credit card. This provides a clear picture of how each card is being used and will alert you of charges that seem out of the ordinary.

Rewards for business owners

Just like a personal credit card, most business credit cards offer rewards or cash back on purchases that can then be used for airline miles or hotel points. And because business credit cards tend to have larger lines of credit, the points and cash back are typically on a bigger scale.

Have a small business funding strategy

Applying for a business credit card can be a positive addition to your day-to-day financial plan. And, when used strategically, it can help you achieve your small business goals. It’s important to speak with your commercial banker to discuss all the benefits and best practices before incorporating a business credit card into your small business funding strategy. 

Small Business Financing for the Next Step

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The Author

Jason Olson

Jason Olson

Director of Treasury Management, VP

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