August 29, 2018 | By Peyton Sawyer
When first starting a business you may be more likely to use a personal credit card you already have, but you should limit the purchases made on that card. There are many reasons a business credit card can be beneficial to your business. Take a look below for some of the advantages that it can offer your business:
Establish a Business Credit History
Establishing a separate credit history from your personal credit is a great way to build business credit. By doing this, your business has a better chance of growing and becoming more profitable. Small businesses are often refused business funding if they do not have the credit history required for approval. Your personal credit may only be able to get you so far, depending on how overextended you are in your personal life.
Strengthen Financial Relationships
Having access to other financial products that can grow your business can offer you the added benefits that you're looking for. If you select a credit card provider for your business that can provide a variety of products to serve your business better, then you are headed in the right direction. A business line of credit can offer you the power to increase purchasing, where as a personal credit card may limit your growth.
Separate Your Personal Situation
Have you ever heard the saying, “never mix business with pleasure”? Well, that goes for your credit cards too! It is important to keep business expenses separate from personal expenses. Keeping your expenses separate will limit your personal liability and help to provide you with the legal protection you need in the event that your business experiences any struggle or even failure. It is also important to keep your business spending separate for tax purposes. Only your business related expenses are deductible on your business tax return.
Increase Available Credit
If you are like the many credit card holders out there, your personal credit cards have a balance that has not been paid off. That means that the available credit on those cards are not at their max. When you start the journey into business ownership, you want to start fresh. Investing in your future with a business credit card will not only help you to access more available credit, but it will also help you keep track of your business expenses with ease. Intermingling your personal purchases with business purchases can be very confusing when you try to track your spending in your business or personal life.
Alternative Funding Options
If your personal credit, poses an issue when applying for a business credit card, you will need to consider other alternatives for your business. Applying for unsecured business funding (a type of funding that does not require collateral) may have more flexible credit requirements. Unsecured funding is subject to higher credit limits than secured funding, so be careful in selecting the right alternative funding solution for your business.