Is a Business Credit Card Necessary?

Is a Business Credit Card Necessary?

Running a small business is both rewarding and challenging, and one challenge that every business owner faces is managing cash flow. While it’s nice to have plenty of cash on hand to operate your business without taking on debt, that is not always possible or practical. In some cases, it can even stunt the growth of your business.

If you are considering whether a business credit card is necessary for your company, consider these benefits.

Distinguish Between Personal Finances and Business Finances

Obtaining a business credit card might not be absolutely necessary for every small business, especially if you are just starting out part-time as a side hustle. But if you are operating as a sole proprietor and doing business under your own name, it will be to your advantage to separate your business finances from your personal finances.

One of the best ways to do this is by opening up a separate business bank account and business credit card. This can make things much easier at tax time, when doing a business plan, when creating an annual budget, and – in some cases – if being audited.

Provides a Hedge Against Unexpected Dips in Cash Flow

Many entrepreneurs – especially first-time business owners – get caught up with an abundance of optimism about how great their product ideas are and how quickly their business will take off. But then reality kicks in and it takes longer than expected to turn a profit.

Sales don’t materialize as quickly and as consistently as expected.

Funding evaporates.

And now, with money running out and cash flow drying up, they look for financing options to bail them out.

The problem is that by this time, it might be a little too late.

Don’t wait until you need credit to start applying for credit.

As soon as you are able to get a business credit card, get one. You don’t have to use it all the time. You don’t have to carry a balance. But at least have it in your back pocket in case things go south.

Build Business Credit to Unlock Additional Funding

Using credit to turn around an unprofitable business is occasionally necessary. But highly profitable businesses can also benefit by getting a business credit card and other financial products.

When your company is successful and bringing in profits every month, you’re obviously doing a lot of things right. And that puts you in a great position to expand your business for potentially massive growth.

With a high-limit business credit card, you can purchase new equipment, stock up on inventory at discount prices, and more.

Instead of using up all your cash to fund purchases, your business credit frees up that cash to hire additional employees, make payroll, pay vendors, and secure additional commercial space.

If you have a small business and are on the fence about whether you need additional funding, contact Diamond Capital Financing to see how a business credit card can give you more options for running and growing your company.