A Smart Guide On Using Credit Card To Finance Your Small Business

You would be lying if you say business funding and maintaining cash flow isn’t one of the toughest parts of being a small business owner. 

And one of the obvious solutions yet very unexplored for many people, seems to be credit card business finance. 

A lot of business owners are simply terrified by the sheer idea of in-debt for their business with no pulling-off regular profits enough to pay. 

Others possess the lack of awareness towards it making it almost the last train to hop in. 

However, there are indeed plenty of entrepreneurs who are using credit lines to fuel their businesses, but arguably smart about it. 

Business credit card financing requires awareness and knowledge to pursue smartly. 

You also need to understand what pros and cons it comes with before you select this legitimate source of business funding. Then, there are various risks and challenges you must be aware of too. 

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In This Article

What is a Business Credit Card? 

You are more likely to have a personal credit card for day-to-day use, and may even use the same for business purposes as well. 

However, you shouldn’t be! Personal credit card and business credit card should be different with their dedicated purposes. 

If you’re a small business owner, you must be receiving tons of small business credit card offers. 

It is definitely something worth considering as business credit can increase the purchasing power of your company. 


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These small business cards allow owners to have easy access to revolving lines of credit with a set limitation for making purchasing and even withdrawing hard cash. 

Just like a personal credit card, you also have to give an interest charge if you do not repay the balance before or on the completion of the billing cycle. 

There are plenty of credit card companies offering business credit lines where you have to apply online. 

Make sure you first compare different credit card plans, its benefits, charges, features and terms to apply for one. 

How Business Credit Cards Can Be Helpful To Your Small Business? 

why small businesses finance using credit cards

Business Credit Card Ensures Accountability 

Business credit cards can be a really smart step towards your small business financial health. 

They can be effectively used to make your accountability system bomb-proof preventing any potential damage to your business. 

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Bringing a business credit card demands a long process requiring prearprpoval for everything, from recipients to all the necessary documents on time. 

It is evident that before applying for a business credit card, small businesses have to set up their place for better accountability and functionality. 

Make sure you have a system at your business place before the credit card reaches your office. 

Businesses Get Lower Interest Rates 

One of the greatest benefits of using a business credit card for your business financing and expenses, is definitely the lower interest rates. 

According to a survey conducted by U.S News and World Report, the APR (Average Percentage Rate) of all the credit cards available in their database is 15.6 % to 22.87% 

However, when it comes to business credit cards, the interest rates, the APR you get is quite similar at 14.22% to 22.19%. 

Business credit cards managed to be the financial source for small businesses with  the lowest interest rate possible when compared to other asset-based lending resources. 

Businesses Don’t Have To Lose Any Equity 

The traditional method of getting your business finance is about a stakeholder in your company. 

It is about getting the money in the exchange of selling out some portion of the pie, of your company to the investor or your business partner. 

So you always have to lose equity to raise funds for your business. And the worst part, you have to do it all again whenever you need more funding. 

Since a debt is all yours, you don’t have to lose any equity. Business credit cards are the type of debt financing to your business. 

With business credit cards, you don’t have to sell stock in your business or give up any ownership and equity. 

And once your business starts growing, you can slowly take money from your business and repay the credit card debt. 

There Is No Balance Trasfer Fees 

Usually with busines credit cards, there are no balance transfer fees to pay. 

If you use your personal credit card to pay the startup cost or any investment for your small business, you can transfer that balance to your business credit card. 

Surely, you can take some time to do better when your business gets established. 

This is also why business credit cards and personal credit cards should be different. 

Not just that, the transactions also should be separate for making the tax work smooth and easy. 

You Get Reward Programs With Business Credit Card 

You must have already been aware of the reward programs offered by credit card companies at the personal credit cards. 

Well, with a business credit card, the rewards are even better. And there are many reward programs available for specifically the owner of the business. 

Everytime you make a purchas which is going to be a lot with establishing or growing the business, you are going to earn reward points. 

With some, there are always some heavy discounts, coupons, airline miles, cashbacks and a lot of other benefits as well. 

It is true that some of the similar you also get on personal credit cards but that’s most focussed on personal usage, and less beneficial for sure. 

You Also Get Revolving Credit

This is one of the most exciting parts of having a business credit card for your small business. 

You get revolving credit with your business credit card which means you can reuse your credit line when it is paid off. 

Basically, you can just keep pulling money from your business credit card to your business and paying off at the same time. 

Until and unless you maintain a balance and pay your dues on time, revolving credit works like a genine lamp to fuel the cash flow of your business. 

Sometimes, it is the consistent money that your business needs in order to grow and that only seems to be the problem at hand. 

Manage Cash Flow Of Your Business 

If you get a business credit card for your small business, the very firstmost problem it resolves is maintaining the cash flow. 

And most of the businesses are suffering from the lack of cash flow. Business owners try so hard to get money from here and there just to keep their orders fulfilled. 

Worst of all, even if your business is growing and going great, you’re getting orders but not having a cash flow sucks all the fun out of it. 

So a business credit card, used responsibility and smartly can resolve that issue rightaway. 

What Are Some Challenges With Business Credit Cards?

challenges of business credit cards

Business credit cards, just like personal credit cards, come with its own pros and cons to keep. 

However, credit is considered to be a financial tool that totally depends upon how it is being used. 

If you are smart about using the business credit card, it can be a real game-changer with all the listed benefits above. 

On other hand, it can really put you in debt and sabotage your entrepreneurial career and even life, if not handled well. 

On a less dramatic side, it can harm your busines financial health and your personal as well. 

So whether you see it as cons, disadvantages or challenges, here are these that you need to take care of 

Business Credit Cards Are Easy To Abuse 

Not just business credit cards, the usual business credits only are easy to abuse. You can miss the payments over payments through their due dates. 

Then, there can be high balances or credit card limits exceeding issues and so much more can cause trouble. 

Everything you do with the credit card has financial consequences. Not to mention how it affects your credit score and ability to apply for loans. 

And when it comes to business credit cards, the implications get amplified. It can put you at risk of high debts, exetreme pressure and over-spending habits. 

Even a simple mess up in a financial decision which is not remotely smart can cause you to pay high fees, loaded interests and long overdues at your head. 

Business credit card can be a ticking financial bomb already ready to go off, if you do not handle it with care. 

The challenge is to handle it with utmost care if you really want to reap the maximum benefits of a business credit card. 

It Can Lock You Out For All Other Type Of Credit

If you end up having too high of a balance, you can be locked out from all other kinds of credit.

Once you start using the business credit card to pay the startup cost for your business, you would see your credit card limitation exhausting.

You would find out that your business has consumed too much debt and not enough to qualify for other forms of business financing.  

It locks your busines to not get any other type of credit line. 

Tips For Smartly Financing Your Business With Credit Card 

Quick Pro Tips For Smart Financing With Business Credit Card 

  1. Always make your credit card dues on time. 
  2. Understand the terms and agreements beforehand.
  3. Try to do full outstanding payment of your credit card. 
  4. Pay more than the minimum payment. 
  5. Always check and review  your credit card statements 
  6. Schedule your credit card dues for autopay.
  7. Never spend over your credit card limit. 
  8. Regularly use your business credit card. 
  9. Make use of the business credit card rewards and offers. 
  10. Redeem your rewards every month. 

Understanding What Business Credit Card Financing Bring To The Table 

Lot of small businesses do not understand what it really going to mean when they let business credit financing enter their investment.  

Even most of them aren’t really aware of the fact about why they need a business credit card. 

You are supposed to sort out every tiny detail of this new financial medium and be prepared for it. 

First you understand the advantage you are getting here : 

  • Convenient accessibility to a revolving credit line to easily maintain your cash flow and pay short-term busines expenses.
  • Also helps in building your business credit history and credibility for applying for future loans. 

You need to be very careful on how specifically you are going to use the credit card. 

It is essential to highlight the finance-related challenges of your business and how business credit cards can be the solution. 

Otherwise, unnecessary access to finance which may not be timed well with your business can cripple the financial health of your business with debt. 

So make your mind whether what you’re really looking for is- debt form of financing. 

One of the ideal reasons why you would go for debt financing is not wanting to give up equity.

Make Sure You Read The Terms & Agreements

Most of the small businesses fail to remember the very basics of getting a credit card for business financing. 

It is to understand what they can expect from the credit card financing. What are their terms you need to abide by? 

It should fit with your business requirements and circumstances. Especially, you wouldn’t want some hidden detail that came to be known later. 

So make sure you don’t just read the terms and agreements but also clarify all your queries over it as well. 

Always Check Your Credit Card Statements Regularly 

Every month you are going to get the credit card statement either by email or by the post at your doorstep. 

The credit card statement will include all the transactions from the previous billing cycle including all the transactions made listed there. 

Reading your billing statement is a crucial practise that you need to incorporate in your life, actually for all or any credit card of yours. 

Review your monthly credit card statement with the expenses you have. Analyze, match and verify all the purchases done you can see on the statement. 

Look for any errors or the unauthorized charges you see in the statement. 

If you find any, communicate with the credit card company and raise the issue to be cleared up. 

With Avantages, You Also Must Appreciate The Risks 

The advantages, benefits comes with utlizing the business credit card for financing your small business is mountingly high in number. 

However, one must also not ignore the risks, challenges and disadvantages that come along. 

There are some indeed potential dangers you have to face with business credit card financing. 

One of the prominent issues with credit cards is abuse or misuse of credit cards at the expense of cash flow balance. 

Lot of business owners fall in the trap of resolving non-financial issues with debt money, creating a failing business. 

Not to mention, the damage to your business credit history or credit score with lack of right credit card decisions. 

According to a study, small businesses reduce their chances for survival by 2% for every $1,000 credit debt they take on. 

So what you need to learn is, what possible challenges you will be facing with business debt financing. 

Once you learn the challenges to predict, it becomes easy for you to get prepared and plan accordingly. 

Make Timely Payments 

Even if you get one late payment on your business credit card, it affects your credit score or credit history significantly. 

At least it remtains on your credit report for years to be found out. 

So the best way forward is to put your credit card payments in automation, so the required funds will be automatically paid to your credit card bills on time. 

There are many third-party apps that help you schedule your credit card payments without any hassle. 

Also, make sure the bank account or debit card you are connecting to for the auto-payment always has enough balance for the deduction. 

Or you can just do it the old-fashioned way, by manually paying your credit card bills before the deadline. 

If you’re not good with dates, make a physical chart of all of your credit card payments and even other payments on a calendar. 

Keep it at your room or desk, so always remember to pay on time. 

Selecting The Right Credit Card For Your Business

There are tons of credit card companies offering business credit cards to small businesses. 

You need to take things slow with this decision to begin with. 

You should be focusing more on getting a business credit card for your business, and not a personal credit card. 

Dividing your personal and business finances is the one of the main reasons for getting a business credit card at all. 

Business credit cards coms with their own set of benefits that you won’t get in the personal credit card. 

You will get higher spending limits and specificial business-oriented programs with business credit cards as well. 

While looking for the right business credit card, you also need to check their annual fee, interest rate, benefits and other reward programs as well. 

Make sure you take your time researching about finding the right match of business cards for your business. 

Try To Make More Than Minimum Payment 

A little more effort while paying your credit card dues everytime can really make a difference for your long term financial stability. 

You are supposed to pay the minimum payment on your credit card dues on a particular date, and it’s good you always maintain that. 

But the best foot forward will be to pay more than the minimum payment. It will help you pay off your credit card faster and easier. 

Even a tad bit more money every month would mean you are getting closer to paying off all your credit card amount. 

Also, it makes a good borrower in the eyes of the lender, the bank. It also may prevent you from paying some high interests as well. 

Setting Up Automatic Payments 

One of the best ways to ensure that you are paying your credit card dues on time is to set up an automatic payment system. 

This will not just protect you from the late credit card payments but also give you peace of mind and one less thing to worry about. 

And being a business owner, that’s something you want a lot – the pece of mind and time. 

There are various ways you can schedule your credit card to be paid automatically every month.

 It gets deducted from your bank account you provided to your bank or other third-party application. 

Also, make sure you schedule the payment more than the minimum payment usually required. 

Another thing to remember in this case is always have enough funds in the account from where automatic payment is scheduled. 

This can do wonders for your financial health and credit history. Making payments on time will open a door for more and more fiance offers.

Make Sure You Take The Advantage Of Introductory Rates 

There are many credit cards available in the market, which come with 0% APR for 9 or 12 months. 

So make sure you don’t waste this opportunity and take the advantages of these introducotyr rates. 

So you are getting here a no-interest loan that you can make the best of by getting large purchases early on and further paying off monthly over the time. 

Negotiate For A Lower Interest Rate 

Negotiation with your credit card company is essential to get yourself a lower interest rate. 

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It will help you save tons of money when you look back over a period of time, say one or two years. 

To really be able to negotiate with your bank, you have to first establish a good payment history, enough to swing the case on your side. 

Lower interest rates will also help you pay off your overall credit card dues faster than usual. 

Lower interest rates will also help you pay off your overall credit card dues faster than usual. 

Use Your Business Credit Card Regularly 

Even if you don’t really need a business credit card very often or do not use it much after sometime, you still must make regular use of it. 

The thing is if you don’t use your credit card regularly, you will be risking the card account getting shut for inactivity. 

And this can lead to affecting your credit history and even lowering your credit score as well. 

The best balance you can make to keep your expenses with credit cards limited within the 30% of total credit limit. 

In this way, you don’t risk overusing or abusing the credit card and also do not risk inaffectivness of the credit card account. 

One more thing you need to consider here, credit utlization, means how much of your available credit you are using or used also affects your credit score. 

So if you get the utlization rate over 30% for a long time, that can affect your credit score in the long run as well. 

Pay Full Bill Instead Of Minimum Balance 

One of the bad habits that get encouraged to be normal is paying the minimum amount of your credit card monthly bill. 

And especially when you easily pay the full amount but still decide to pay the minimum. 

Paying the minimum balance and not the whole outstanding balance may sound easier to do at the time. 

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But you know that is only going to be tougher and tougher to repay over time and especially adding up more on top of it. 

Develop a habit of paying the full balance of your credit card every month, especially if you can easily. 

You can also try to pay as much as you can but defintely more than the minimum payout that the bank demands. 

Not paying that, only will cost you money over time. When you pay the minimum balance every month and are not full, your overall balance is only going to decrease by a small amount over time. 

Identify And Rectify Financial Problem Immediately 

Financial problems are always going to be there, if not already getting at rise. However, there will be a leveling of these times with very settled or financial growth periods. 

The point here is to be prepared for any financial issue coming your way. It always starts froma rookie mistake or some kind of lapse in credit card payments. 

It can be a business getting through rough times or some bad credit decision. 

You need to be very, very prompt of such situations and think clearly when dealing with financial aspects of your business, and life. 

Especially when it is related to credit, be proactive to identify a dent in the financial regularity and rectify it as soon as possible. 

With financial crisis and tough dealings with business credit card, make sure not  leting escalate the problem further. 

Focus on paying dues if that’s the issue by reducing any other business expenses. Lay low, save a lot and manage money to get over the situation at a time. 

Never Over-Limit Your Credit Use 

This is one of those sacred rules you have to remember when using a credit card, not just business or even personal. 

If you over-purchas or go over your credit card limit, the credit card compan might raise your interest rate. 

Keep Track Of Your Purchases Over Time 

You might be  a solo entrepreneur who might expand in the future or currently owning a small company with 10 employees or even growing one with 50 employees. 

In any kind or level of small business, there are going to be expenses and investments, like a lot. 

And when you are financing through a business credit card or even practically running on it, there are hundreds of expenses in a month. 

Some could be avoidable or even useless. Most of them could be at the bad timing as just before the credit card due date. 

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And overspending and financial mismanagement is a common issue with business credit cards. 

What you need to do is track the credit card usage over a period of the time. 

Pay attention where you are spending most of your money and how it can be optimized.  

See whether there are irregular transactions or some old software subscriptions at auto-charge that you don’t use now.

Tracking and analyzing your financial or credit history helps you make smarter financial decisions. 

There are many tools or applications as well to track that for you and provide you with the kind of data to help you grow your business with good financial health as well. 

Use As Less Of Your Credit Limit As Possible

Well, not something you would like to hear! After all, a business credit card is there to take care of all financial requirements for your business. 

You might be even tempted to just max out your business credit card or just simply use it as required. 

But in hindsight, it never appears to be the best strategy regarding credit card financing. 

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Credit utlizations is about how much of a credit limit you are using from your credit card. 

It is the second biggest factor after regular payments to your credit score health. 

Don’t run too much on your credit card and pull a high balance every month as it can hurt your credit score. 

Try to maintain balance about how much you spend and when you spend along with when you clear it off. 

Redeem Your Credit Card Rewards 

There are a lot of people who aren’t simply aware of the various perks and offers a credit card provides to their customers. 

And they went fully ignored, and many of them can be really used to buy in or get some reall heavy discounts.

Take some time and understand the rewards program with your credit card. 

You can always maximize the cashback or the reward points you earn through spending money on your credit card. 

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All you have to do is spend on the categories of the credit card where you can get the maximum reward points or cashback. 

It is no brainer, basically you have to use the credit card for purposes you might have using other cards, debit card, cash or wallet. 

However, it is suggested that the expenses should fall under your business category. 

For example, gas payments or restaurant bills can be under business if you are going to meet a client. 

Don’t let your rewards or cashbacks waste away. Look how you can redeem and use your points. 

And then, there are other perks, offers and occasional gift cards as well that you always have to keep checking in for. 

Find The Best Deal For Your Business

Don’t rush in! Most of the small businesses get excited to fund their business, and it can be for an aspiring entrepreneur. 

But you need to give it more thought, and take it slow. Use this time to study the credit card products offered in the market. 

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Don’t hop onto the first credit card offer on the phone, even if it sounds perfect. 

Take time with multiple phone calls with the credit card sales guy or repsentaitve to get the full scheme with the credit card. 

Explore all possible situations your business can be in, not just today but in future as well including the bad ones, and see how credit card plays out in those circumstances. 

Research thoroughly and compare multiple credit card companies that are more focussed on providing business credit cards. 

Keep Checking Your Monthy Statement 

You need to keep checking your monthly credit card statement. 

Go through it and analyze all the purchases, transitions and additional costs added is valid according to you as well. 

You need to be assured there are no discrepancies as per your monthly expenses for the credit card.  

Especially, frauduelnces cases are lot these days, so you need to make sure from your side regarding the accuracy of the statement.

Deducting Credit Interests From Your Taxes 

One of the additional tips you would like to get with business credit financing, is deducting credit card interest from the taxes of your business. 

Basically you are deducting the interests from the same year provided the purchases made are all business related. 

You can also go further and deduct any credit card annual fee, some other program charges, late charges and all credit card related charges from the taxes. 

This is definitely going to ive you great relief in the yearly taxation of your business. 

Focus To Pay Off Your Credit Card Debt As Quickly As You Can

Remember to not be sitting ducks with all credit card debt on your business. Give your prime attention to clear it off as early as possible. 

The chances with where your business is growing, it might become easier to pay off credit card debts but you need to pay attention. 

Instead of excessive buying or using the funds for other investments, focus on paying off your debt first. 

You can also consider the fact that once you pay off your credit card debt, you will be able to refinance as well for more expansion of your business. 

Understanding Charges/Fees And How To Avoid Them

First you have to understand there are different fees and charges tha credit card companies put in your bills. 

And the majority of these charges or fees can be avoided except the annual fees which are mandatory to pay, also you have to sign up when buying for it. 

To start with, if you pay your dues on time, you can simply avoid the late charges on your credit card bills. 

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Also, make sure you are not going with the cash advance, so as to avoid the cash advance fees. 

Then there are other fees such as foreign transaction fees that come on the purchases you made on foreing land. 

You might have opted for your credit card to pay for such transactions. 

You can also avoid using it for personal uses to increase the chances of these additional charges anyway. 

Communicating With Your Credit Card Company 

It is important that you can easily get hold of your credit card company for any possible financial changes in your business. 

Or even just for any query or discussing upgradation or any kind of credit card related issue. 

This is at first can be concerned while you are getting a credit card in the first place. 

Be sure how you can connect with their representative with experts in the field with authority to help you. 

Then, whenever your business is going through any level of financial change, mostly in cases of getting down, connect with the concerned person. 

Give them a heads up and talk about your situation, especially when there is an issue to pay them back at a moment. 

They are more open to negoatiton and welcoming to resolve your issues especially related to repaying. 

Proactive with your credit card companies going to maintain you in the good books, might even protect your fall off from your credit score even at tough times. 

Connect with them also when you are going to expand your business and do well. You might need an increase of the credit limit that can help you in expansion and maintaining more business. 

There are just too many situation changes where you would need to contact your credit card company. So be ready to do that. 

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